Affluence Advisory
Quick Summary
On 9th November 2021 Securities and Exchange Board of India("SEBI") has notified amendments to Securities and Exchange Board of India (Alternative Investment Funds) Regulations 2012 ("SEBI AIF REGS") and Securities and Exchange Board of India (Portfolio Managers) Regulations 2020 ("SEBI PMS REGS") permitting Managers of Alternative Investment Funds ("AIF's")under Category I and Category II registered with SEBI under SEBI AIF REGS to offer conditional Co-Investment Opportunities to existing Unitholders /Limited Partners of AIF Funds in unlisted investee companies in which AIF has invested.
To provide Co-Investment Opportunities to Unitholders/Limited Partners the Manager is obliged register with SEBI as Co-Investment Portfolio Manager under SEBI PMS REGS.
1. Co-Investment Portfolio Manager can provide services
- only to Unitholders of Category I and/or Category II AIF; and
- only in respect of unlisted securities of investee company in AIF Fund has made investment.
- co-investment opportunity will be for the unitholders of Funds managed or sponsored by the Manager or Sponsor.
2. Co-Investment Offer should be on the following terms
- The terms of Co-Investment in a investee company by a Manager or Sponsor or co investor shall not be more favorable than the terms of investment of the Alternative Investment Fund including terms of exit from Co Investment in a investee company including the timing of exit should identical. This requirement identical exit terms will apply from 9th November 2021 only.
3. Co-Investment Portfolio Manager has been granted several concessions from various requirements under SEBI PMS REGS interalia the following
- Key Team members can qualify as Principal Officer
- No requirement of minimum Net Worth of Rs 5 crore.
- No need raise NetWorth independently or capital adequacy for each activity etc.
- No need for maintain Nrworth on Continued basis.
- Exemption from applying time weightage rate of return while determining performance which can be purely determined on contractual basis.
- Exemption mandatory disclosure of Diclosure Document on the Website
- Exemption from minimum investment amount for accepting co investment.
- Renewal of Investment being considered as the fresh investment.
- 100% Investment of Co investment in one investee company possible.
- Exemption from appointment of custodian.
- No need of separate compliance officer, the principal officer can double up as a compliance officer also.
4. Few other requirements for Co-Investor
- Cannot seek pre-mature withdrawal from investee company, only pro rata withdrawal with the Fund possible.
FAQ :
SEBI has amended regulations to permit Managers of Category I and II Alternative Investment Funds (AIFs) to offer co-investment opportunities to their existing Unitholders/Limited Partners in unlisted investee companies.
Managers of Alternative Investment Funds (AIFs) registered under Category I and Category II with SEBI can offer co-investment opportunities, provided they register as a Co-Investment Portfolio Manager.
Co-investment opportunities can only be offered to existing Unitholders/Limited Partners of Category I and/or Category II AIFs, and only in respect of unlisted securities of investee companies where the AIF has already invested.
The terms of co-investment must not be more favourable than the AIF's investment terms, and exit terms, including timing, must be identical to the AIF's.
Co-Investment Portfolio Managers receive several concessions, including key team members qualifying as Principal Officer, no minimum net worth requirement, and exemptions from certain disclosure and custodian requirements.
No, co-investors cannot seek pre-mature withdrawal; they can only make pro-rata withdrawals in line with the Fund.
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