Alternative investment funds (AIF) Registration

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Alternative investment funds (AIF) Registration

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What is Alternative investment funds (AIF)

 

Alternative investment funds means funds established or incorporated in India which is a privately pooled investment vehicle which collects funds from sophisticated investors, whether Indian or foreign for investing it in accordance with a defined investment policy for the benefits of its investors.

Alternative investment funds not include funds covered under the SEBI (mutual funds) regulation, 1996, SEBI (collective investment schemes) regulation 1999, or any other regulation of the board to regulate fund management activities. Basically alternative investment is assets other than stocks, bonds and cash (commodities).

Alternative investment funds act as a defence rather than an offense investment; long-term investors are grasping the importance of including alternative investments into the diversification of their portfolios. It also gives the investors a risk/return outline that is different from that of equities, bonds or cash. Alternative investments also include real-estate investment trusts, hedge funds, venture capital, private equity, commodities, MLPS, REITs, trust deeds and real assets such as rare coins, art, wine and precious metals. They have a low correlation to stocks and bonds and reap in benefits and are less volatile.

Benefits of Alternative investment funds (AIF)

 


Alternative investment funds can help in overcoming the effects of market volatility (market fluctuation) on a portfolio while providing attractive returns.


A "diversified" portfolio of stocks and bonds has been moving nearly in lock step with the stock market.


Alternative investments look beyond public markets and look at opportunities available in both private and unlisted markets, providing a wider choice of investment opportunities.
 

Categories of Alternative Investment Funds

 

Categories of alternative investment funds:

  1. Category - I

  2. Category - II

  3. Category - III

 

Category - I

 

Category I alternative investment funds especially focuses on investing in start-ups, SMEs, social ventures. These are the key sectors as they are considered to be economically or socially desirable according to the government. Being socially desirable initiatives, profit may or may not be a motive of category I. Example: category I AIFs includes Angle funds, infrastructure funds, SMEs funds and venture capital funds.

 

Category - II

Alternative investment funds which do not fall in Category I and III and which do not undertake leverage or borrowing other than to meet operational requirements and as permitted in the SEBI AIF,s Regulations, 2012. Several types of funds such as real-estate funds, private equity funds (PE funds), funds for distressed assets, etc. are registered as Category II of AIFs.

 

Category - III

AIF’s which adopt diverse or difficult trading strategies and may adopt leverage including through investment in listed or unlisted results. Several types of funds such as hedge funds, PIPE Funds, etc. are registered as Category III of AIFs.

An Alternative Investment Funds under the SEBI Regulations, 2012 can be established or incorporated in the form of a trust or a company or a limited liability partnership or a body corporate. Most of the Alternative Investment Funds registered with SEBI are in trust form.

 

Angel funds:

 

Angel fund is a subcategory of Venture Capital Fund (VC Funds) under Category-I Alternative Investment Fund that raises funds from angel investors and invests in accordance with the provisions of Chapter III - A of AIF Regulations.

Angel investor means any individual who proposes to invest in an angel fund that is startups, small business and Medium one of the following conditions, namely,

(a) An individual investor who has net real assets of at least 2 crore rupees excluding the value of his principal residence, and who:

 (i) Has the early stage investment experience, or

(ii) Has the experience as a serial entrepreneur, or

(iii) a senior management professional with the similar domain with at least 10 years of experience;

(b) A body corporate with a net worth of at least 10 crore rupees; or

(c) AN AIF registered under these regulations or a VCF registered under the SEBI (Venture Capital Funds) Regulations, 1996. Angel funds shall accept, for the maximum period of 3 years, an investment of not less than `25 lakh from an angel investor.

 

Debut fund:

 

Debt fund is an AIF which invests primarily in debt or debt securities of listed or unlisted investee companies according to the stated purposes of the Fund. In this regard, it is clarified that, since Alternative Investment Fund is a private joint investment vehicle, the amount donated by the investors shall not be utilized for purpose of giving loans.

 

Funds of funds:

Fund of Funds, generally known as gathered from publicly available sources is an investment strategy of holding a portfolio of other investment funds rather than investing directly in stocks, bonds or other securities.

Process to registered as an Alternative Investment Funds:

 

  1. Applicant should made application for registration to SEBI in FORM A as provided in regulation along with all the necessary docs.
  2. After filling application the applicant will receive a reply from SEBI within 21 working days.
  3. The applicant must mentioned in covering letters as the whether :
  • it is required with SEBI as a venture capital funds.(if yes, provide the details)
  • it has been undertaking the activities of an AIF prior to such application (if, yes provide the details)
  • it is applying for registration of new funds.
  1. As an integral part of the registration process the applicant will submit the following:
  • FORM A properly filled, numbered, duly signed and stamped
  • Application fees of Rs. 10,00,00 (in way of draft in favour of The Securities and Exchange Board of India, payable at Mumbai)
  1. The applicant shall also make an online application.
  2. The applicant are advised to go through SEBI (Alternate Investment Fund) regulation 2012, for checking the eligibility criteria and such other details.

Corpseed will help you to register as Alternative Investment Funds.

Approval of Certificate of Registration

 

1. After approval from SEBI, the applicant should pay registration fee of INR 5,00,000/- (In case  applicant is not registered with SEBI as a Venture Capital Fund) / Registration fees (In case applicant is registered with SEBI as a Venture Capital Fund) of INR 1,00,000/- to SEBI via bank draft in favour of “The Securities and Exchange Board of India”.

 

2. SEBI must take into account requirements as detailed in the Regulations. If satisfied that the applicant justifies the requirements as specified in the Regulations, SEBI shall approve the application and notify the applicant of the same.

 

3. On receipt of registration/ re-registration fees, SEBI will issue the applicant the certificate of registration as an Alternative Investment Fund.

Tenure and listing of Alternate Investment fund:

 

For AIFs scheme launched under category I and II shall be close-ended, the tenure shall be determined at the time of application and shall be for minimum three years.

 

Category III alternative investment funds may be open-ended or closed-ended.

 

Extension of tenure of the close-ended AIF may be allowed up to 2 years subject to the approval of two-thirds of the unitholders by the value of their investment in the Alternative Investment Fund. In the absence of permission of unitholders, the Alternative Investment Fund shall fully liquidate within 1 year following expiration of the fund tenure or extended tenure.

 

Units of close-ended AIF may be listed on stock exchange subject to a minimum tradable lot of 1 crore rupees. Such listing shall be allowed only after the final close of the fund or scheme.

Necessary document required for approval

 

A certified true copy of the following documents /Agreements:

 

  • Draft Information / Placement memorandum. Hard as well as soft copy.
  • Investment Management Agreement. (In case of 1st Listing)
  • Certification of registration of AIF issued by SEBI. (In case of 1st Listing)
  • Custodian Agreement. (In case of 1st Listing)
  • R & T Agreement. (In case of 1st Listing)
  • Trust Deed (if applicable)
  • Memorandum & Articles of Association of the issuer (in case of 1st listing)
  • The resolution passed by the trustee if AIF is established as trust or Board of directors in case AIF is established as Company or by partners if AIF is established as an LLP (Limited Liability partnership) at their meeting approving listing of units of close-ended AIF on the BSE.
  • An undertaking from the CEO/ compliance officer that AIF is in compliance with Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012 as amended and all the other applicable laws.

Corpseed having expertise in this area and it will help you to get your scheme listed on stock exchange.

 

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