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In India Alternative Investment (AI) is a very hassle free process for setting up Angle Fund, VC Etc.
SEBI has introduced new Regulation which is Securities and Exchange Board of India (Alternative Investment Fund) Regulation, 2012 for the purpose of pooled investment funds in India, such as real estate, Private Equity, and Hedge Funds.
Under this Alternative Funds refers to a Fund refers to a Fund established in the Form of Trust, Company, Limited Liability Partnership or Body Corporate-
1. Fund is Collected Privately from the investors according to the defined investment policy for the benefit of investor, whether Indian or Foreigner.
2. It is to be noted here that it should not be covered under Securities and Exchange Board of India (Mutual funds) Regulation, 1996 and Securities and Exchange Board of India (Collective Scheme) Regulations, 1999.
AIF are divided into Three Categories and they are as Follows-
Category I- This type is involved in investing in the start ups and also to receive incentives from SEBI, Government or any other Government regulatory bodies. It consists of Social Venture Funds, infrastructure funds, venture capitalist funds and SME funds.
Category II- These type of entities can invest in any kind of combinations but they are not allowed to do borrowings except for the purpose of day to day operations. This includes funds such as Private Equity Funds and Debt Funds.
Category III- It is a kind of investment which is done or conducted occasionally and then sell such as Hedge Funds.
What is Alternative Investment Fund (AIF) Registration?
AIF Registration process with SEBI
Application in Form A-
The Applicant has to file an Application under Form A as per the regulations along with the cover letter and with other necessary documents as required.
Application Evaluation by SEBI
On the receipt of the application, SEBI will reply within 21 working days to the applicant. However for the purpose of registration time depends upon the requirements complied by the applicant.
Ensure SEBI Compliances
For expedite the registration process, an applicant is required to go through the Securities and Exchange Board of India ( Alternative Investment Funds) Regulations, 2012.
Cover Letter
Here are the following details which must be mentioned by the applicant in the cover letter-
1. Whether it is registered with SEBI as a venture capital fund or not if yes then provide details.
2. Prior to the application, whether activities of an AIF is being undertaken. If yes then provide details.
3. Applying for Registration of a new Fund.
Payment of Registration Fee to SEBI
For Registration, online application has to be filed according to the guidelines prescribed by SEBI. An applicant will submit Form A, which has to be properly filled, duly signed and stamped with the application fee of Rs. 1,00,000/- by way of Bank draft in favour of SEBI, payable at Mumbai.
Certificate of registration
If Applicant has complied with all the regulations, it shall be approved by SEBI and the same will be informed to the applicant. It is also required to pay the registration fees of Rs. 5,00,000/- to the SEBI after its approval by SEBI. And finally SEBI on the receipt of Registration/Registration receipt will grant a certificate of registration.
The Applicant has to file an Application under Form A as per the regulations along with the cover letter and with other necessary documents as required.
Application Evaluation by SEBI
On the receipt of the application, SEBI will reply within 21 working days to the applicant. However for the purpose of registration time depends upon the requirements complied by the applicant.
Ensure SEBI Compliances
For expedite the registration process, an applicant is required to go through the Securities and Exchange Board of India ( Alternative Investment Funds) Regulations, 2012.
Cover Letter
Here are the following details which must be mentioned by the applicant in the cover letter-
1. Whether it is registered with SEBI as a venture capital fund or not if yes then provide details.
2. Prior to the application, whether activities of an AIF is being undertaken. If yes then provide details.
3. Applying for Registration of a new Fund.
Payment of Registration Fee to SEBI
For Registration, online application has to be filed according to the guidelines prescribed by SEBI. An applicant will submit Form A, which has to be properly filled, duly signed and stamped with the application fee of Rs. 1,00,000/- by way of Bank draft in favour of SEBI, payable at Mumbai.
Certificate of registration
If Applicant has complied with all the regulations, it shall be approved by SEBI and the same will be informed to the applicant. It is also required to pay the registration fees of Rs. 5,00,000/- to the SEBI after its approval by SEBI. And finally SEBI on the receipt of Registration/Registration receipt will grant a certificate of registration.
Following shall not be considered as AIF for the purposes of SEBI Regulations
1. Family trusts set up for the purposes and for the benefits of Relatives as defined under Companies Act.
2. ESOP set under the Securities and Exchange Board of India ( Employee stock option Scheme and Employee Stock Purchase Scheme) guidelines, 1999 or as permitted under companies Act, 1956.
3. Employee Welfare trusts or gratuity trusts set for the benefit of the employees.
4. Holding company with the meaning of Companies Act.
5. Other special purpose vehicles not established by Fund managers, including securitization trusts, regulated under a specific regulatory framework.
6. Funds managed by securitization company or reconstruction company which is registered with the RBI under section 3 of Securitization and reconstruction of Financial assets and Enforcement of Security interest Act, 2002.
7. Any such pool of funds which is directly regulated by any other regulator in India.
2. ESOP set under the Securities and Exchange Board of India ( Employee stock option Scheme and Employee Stock Purchase Scheme) guidelines, 1999 or as permitted under companies Act, 1956.
3. Employee Welfare trusts or gratuity trusts set for the benefit of the employees.
4. Holding company with the meaning of Companies Act.
5. Other special purpose vehicles not established by Fund managers, including securitization trusts, regulated under a specific regulatory framework.
6. Funds managed by securitization company or reconstruction company which is registered with the RBI under section 3 of Securitization and reconstruction of Financial assets and Enforcement of Security interest Act, 2002.
7. Any such pool of funds which is directly regulated by any other regulator in India.
Other Important Aspects
Compliances
Following are the compliances which an Applicant needs to follow-
1. After AIF registration AIF must comply with reporting requirements specified by SEBI from time to time.
2. For any updates/circulars/guidelines issued by SEBI with respect to the AIF activity, the AIF must keep check on SEBI website for the updates.
3. In case of any material change in the details already furnished to SEBI, AIF must intimate to SEBI within a reasonable period of time.
Validity of Certificate of registration of an AIF
It is valid till the AIF is wound up.
Redressal of Complaints
For any grievance SEBI has web based grievance redress system which is called as SEBI Complaint Redressal System (SCORES), where investors can lodge their complaints against investors. And it can be mutually decided by the investors and AIF or for the same clause should be entered in their agreement or shall be mutually decided by both the parties.
Following are the compliances which an Applicant needs to follow-
1. After AIF registration AIF must comply with reporting requirements specified by SEBI from time to time.
2. For any updates/circulars/guidelines issued by SEBI with respect to the AIF activity, the AIF must keep check on SEBI website for the updates.
3. In case of any material change in the details already furnished to SEBI, AIF must intimate to SEBI within a reasonable period of time.
Validity of Certificate of registration of an AIF
It is valid till the AIF is wound up.
Redressal of Complaints
For any grievance SEBI has web based grievance redress system which is called as SEBI Complaint Redressal System (SCORES), where investors can lodge their complaints against investors. And it can be mutually decided by the investors and AIF or for the same clause should be entered in their agreement or shall be mutually decided by both the parties.
FAQ
Common List Of Questioner That Our Customer Ask From Us -Solved !
What is AIF category-II Fund?
These type of entities can invest in any kind of combinations but they are not allowed to do borrowings except for the purpose of day to day operations. This includes funds such as Private Equity Funds and Debt Funds.
What are alternatives in investing?
An alternative investment is an investment which is not conventional investment types, such as stocks, Bond and cash.
How do i become AIF?
For becoming AIG minimum 8 years of experience is required. And for that examination is conducted which candidate has to pass. Also he needs to satisfy the code and ethics and conduct standards.
Can category of AIF be changes post Registration?
Yes, it can be changed, but it is conditional in nature. It is required that AIF has not made any investment under the category it is currently registered in.
