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The SEBI has notified a new set of regulations to amend the existing SEBI (Alternative Investment Funds) Regulations, 2012 which shall come into force as on the date of its publication in the Official Gazette.

Analysis: SEBI (Alternative Investment Funds) (Third Amendment) Regulations, 2021

Sr. No.

Amendment

Effect

1

Substitution: Regulation 2(1)

clause (aa) shall be numbered as clause (za).

-

2

Insertion: after Regulation 2(1)(a)

(aa) 'accreditation agency' means a subsidiary of a recognized stock exchange or a subsidiary of a depository or any other entity as may be specified by the Board from time to time.

Explanation: For the purpose of this clause, the Board may recognize an accreditation agency subject to such conditions as may be specified;

(ab) 'accredited investor' means any person who is granted a certificate of accreditation by an accreditation agency who,

(i) in case of an individual, Hindu Undivided Family, family trust or sole proprietorship has:

(A) annual income of at least two crore rupees; or

(B) net worth of at least seven crore fifty lakh rupees, out of which not less than three crores seventy-five lakh rupees is in the form of financial assets; or

(C) annual income of at least one crore rupees and minimum net worth of five crore rupees, out of which not less than two crore fifty lakh rupees is in the form of financial assets.

(ii) in case of a body corporate, has net worth of at least fifty crore rupees;

(iii) in case of a trust other than family trust, has net worth of at least fifty crore rupees;

(iv) in case of a partnership firm set up under the Indian Partnership Act, 1932, each partner independently meets the eligibility criteria for accreditation:

Provided that the Central Government and the State Governments, developmental agencies set up under the aegis of the Central Government or the State Governments, funds set up by the Central Government or the State Governments, qualified institutional buyers as defined under the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, Category I foreign portfolio investors, sovereign wealth funds and multilateral agencies and any other entity as may be specified by the Board from time to time, shall deemed to be an accredited investor and may not be required to obtain a certificate of accreditation;.

The definition of accreditation agency and accredited investor is added by the Board.

3

Insertion: after Regulation 2(1)(p)

(pa) 'large value fund for accredited investors' means an Alternative Investment Fund or scheme of an Alternative Investment Fund in which each investor (other than the Manager, Sponsor, employees or directors of the Alternative Investment Fund or employees or directors of the Manager) is an accredited investor and invests not less than seventy crore rupees.

The definition of large value fund for accredited investors is added by the Board.

4

Substitution: Regulation 10(c) first proviso

the symbol '.' shall be substituted with the symbol ':'.

-

5

Insertion: after first proviso of Regulation 10(c)

Provided further that this clause shall not apply to an accredited investor.

The minimum level of investment value i.e., Rs. 1 crore is not applicable to accredited investors.

6

Substitution: Regulation 12(3)

the symbol '.' shall be substituted with the symbol ':'.

-

7

Insertion: Regulation 12(3) proviso

Provided that the requirements under sub-regulation (2) and (3) shall not apply to large value fund for accredited investors.

In case of large value fund for accredited investors, there is no requirement of filing placement memorandum with the Board for the launched schemes.

8

Substitution: Regulation 13(4)

the symbol '.' shall be substituted with the symbol ':'.

-

9

Insertion: Regulation 13(4) proviso

Provided that large value funds for accredited investors may be permitted to extend its tenure beyond two years, subject to terms of the contribution agreement, other fund documents and such conditions as may be specified by the Board from time to time.

Tenure of the close ended Alternative Investment Fund for large value funds for accredited investors may be permitted to extend beyond 2 years.

10

Substitution: Regulation 15(1)(c)

the symbol ';' shall be substituted with the symbol ':'.

-

11

Insertion: Regulation 15(1)(c) proviso

Provided that large value funds for accredited investors of Category I and II may invest up to fifty percent of the investable funds in an investee company directly or through investment in the units of other Alternative Investment Funds.

In comparison to 25% in case of Category I and II of Alternative Investment Funds, large value funds for accredited investors of Category I and II may invest up to 50% of investable funds in an investee company.

12

Substitution: Regulation 15(1)(d)

the symbol ';' shall be substituted with the symbol ':'.

-

13

Insertion: Regulation 15(1)(d) proviso

Provided that large value funds for accredited investors of Category III may invest up to twenty percent of the investable funds in an investee company directly or through investment in units of other Alternative Investment Funds.

In comparison to 10% in case of Category III of Alternative Investment Funds, large value funds for accredited investors of Category III may invest up to 20% of investable funds in an investee company.

 

Disclaimer: The author is based in Jabalpur and is a Practicing Company Secretary dealing in Corporate, Legal & Taxation services. The information contained in this write up, as provided by the author, is to provide a general guidance to the intended user. The information should not be used as a substitute for specific consultations. Author recommends that professional advice is sought before taking any action on specific issues.

 

The author can also be reached at cstanveersaluja@gmail.com.

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