Alternate Investment Funds

What is an Alternate Investment Fund (AIF)

• Fund established or incorporated in India
• Privately pooled investment vehicle which collects funds from investors, whether Indian or foreign
• To invest in accordance with a defined investment policy for the benefit of its investors.

Category of AIF

Category I AIF

• Venture capital funds
• Angel Funds
• SME Funds
• Early stage investment

Category II AIF

• Real estate funds
• Private equity funds
• Funds for distressed assets, etc.

Category III AIF

• Hedge funds
• PIPE Funds
• Those requiring Complex trading strategies
• Investment in listed or unlisted derivatives.

"Fund'

(a) "Angel fund" a sub-category of Venture Capital Fund under Category I

(b) Raises funds from angel investors

(c) Angel investor- Any person who proposes to invest in an angel fund and satisfies one of the following conditions,

•  an individual investor who has net tangible assets of at least two crore rupees
• excluding value of his principal residence
• Has early stage investment experience, or
• Has experience as a serial entrepreneur or
• Is a senior management professional with at least ten years of experience

(d) Can be a body corporate

• Net Worth of at least ten crore rupees or
• A Registered VCF

Angel Fund Investment

• Angel funds shall accept up to a maximum period of 3 years
• Investment of not less than 25 lakh from an angel investor

What is Debt fund

• Invests primarily in debt or debt securities of listed or unlisted investee companies
• These funds are registered under Category II.
• FUNDS shall not be utilized for purpose of giving loans

What is Fund of Funds

• Fund of Fund is an AIF which invest in another AIF

Forms of Ownership

• A Trust
• A Company
• A Limited Liability Partnership

What is the corpus of the AIF

Corpus is the total amount of funds committed by investors to the AIF by way of a written contract

Maximum number of investors

• Maximum number maximum 1000 investors for all non Angel Funds
• In case of an angel fund, Maximum forty-nine angel investors.
• AIF cannot make invitation to the public at large to subscribe its units
• Invite investors only through private placement. 

Sponsor of the AIF

• Promoter in case of a company
• Designated partner in case of a LLP
• Main Trustee who incorporates the Trust for AIF

AIF launch schemes

• An AIF launches schemes after filing of placement memorandum with SEBI.
• an AIF is required to pay Rs. 1 lakh as scheme fees to SEBI while filing the placement memorandum.
• Such fee shall be paid atleast 30 days prior to launch of scheme

Validity of the certificate of registration

• The certificate of registration of an AIF shall be valid till the AIF is wound up. 

Registration fee paid TO SEBI

Application fees Rs. 1,00,000

Registration fee to be paid by an AIF is as under:

• Category I: Rs. 5,00,000
• Category II: Rs. 10,00,000
• Category III: Rs. 15,00,000
• Angel Funds: Rs. 2,00,000

Procedure for winding up?

Alternative Investment Fund shall be wound up:

• When the tenure of the AIF or all schemes launched by it is over; or
• If seventy five percent of the investors by value of their investment in the AIF pass a resolution for winding up
• In case of a trust, if trustees decide to wind up in the interests of investors
• Once resolution is passed ,no further investments shall be made on behalf of the AIF so wound up.
• The assets shall be liquidated, and the proceeds accruing to investors in the AIF shall be distributed after satisfying all liabilities, within one year from the date of aforesaid intimation.