The concept of Alternative Investment Funds (“AIF”) in India is becoming more and more popular with time. AIFs attractiveness is strengthened by the difficult stock market situation, which has increased investors’ interest in investment services based on their strategy on the decorrelation with the risks and returns of the financial markets and therefore the search for an absolute return. AIF constitutes a distinct class of investments for investors within their overall asset’s allocation. AIFs represents true diversification and exposure to risk other than market risks.
Even though AIFs are marking considerable growth and research work in the past has given a better understanding of the AIFs, it is still the area in which the most progress remains to be made. Hence comprehensive research on the subject and proposed strategies is an integral part of a registration process. In another article, we discussed the overview of AIF, and here we are decoding the registration process as given by the Security and Exchange Board of India (“SEBI”).
Any entity or person who is desirous of acting as an Alternative Investment Fund is required to obtain a Certificate of Registration from SEBI under SEBI (Alternative Investment Funds) Regulations, 2012.
ELIGIBILITY CRITERIA
The SEBI shall consider the following conditions for eligibility in order to grant the certificate of registration:
- The charter documents of entities, i.e. Memorandum of Association in case of a company, Trust Deed in case of a Trust or the LLP agreement in case of an LLP, should permit the entities to carry out the activity of Alternative Investment Fund.
- The charter documents should disallow the applicant or the entities from inviting the public to subscribe to its securities.
- The applicants, whether Trust, Body Corporate, Companies or Limited Liability Partnerships should be duly incorporated and registered with their respective authorities, i.e. Trust under the Indian Trust Act, 1882, Company under the Companies Act, 2013, Body Corporate under laws of the Central or State Legislature and the Limited Liability Partnership under the Limited Liability Partnership Act, 2008.
- The Applicant, Sponsor and Manager are fit and proper persons based on the criteria specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008;
- The Manager or Sponsor has the necessary infrastructure and workforce to discharge its activities effectively.
- The applicant has clearly described at the time of registration the investment objective, the targeted investors, proposed corpus, investment style or strategy and proposed tenure of the fund or scheme
- The registration of the applicant or any entity has not been refused earlier by SEBI.
PROCEDURE
- The application for grant registration is made in Form A as specified in the regulations, along with necessary documents and non-refundable application fees of INR. 1,00,000/-
- The fees shall be paid through direct credit in bank account through NEFT/RTGS/IMPS or any other mode allowed by RBI or by bank draft in favor of “The Securities and Exchange Board of India” payable at Mumbai.
- On receipt of the application, SEBI will reply within 21 working days. SEBI will satisfy itself whether the requirements specified under regulations have been fulfilled and, on being satisfied, shall approve the application.
- On the application being approved by SEBI, the applicant must proceed further by payment of registration fee of Rs. 500000/-. On receipt of the registration fee, SEBI shall grant the Certificate of Registration in Form B.
Having explained the procedure for registration of AIF, mentioning, in brief, the documents and general information that would be required from the Sponsor, Manager and the Applicant (Trustee/Company/Limited Liability Partnership/Body Corporate) for registration:
GENERAL INFORMATION
- Name, address of the registered office, address for correspondence and principal place of business, telephone number(s), fax number(s), the e-mail address of the applicant, sponsor, manager, trustees/directors in case of company.
- The legal status of Sponsor and Manager and date and place of incorporation of Sponsor and Manager
- Name, direct line number, mobile number and e-mail of the contact person(s).
- Self-attested ID and Address proof of Directors/Trustees/Partners
- The legal structure of applicant – Whether the applicant is a company or trust or limited liability partnership or a body corporate.
- Date and place of incorporation/establishment.
- Category under which the application is made.
- If the applicant proposes to register as a Category III Alternative Investment Fund, whether the fund shall be open-ended or close-ended.
- Whether the applicant or its associates or its sponsor(s) or its manager(s) is/ are registered with the SEBI, Reserve Bank of India or any other regulatory authority in any capacity along with the details of its registration.
- Details of infrastructure for conducting activities as an Alternative Investment Fund
- Copy of the draft placement memorandum.
- Write-up on the activities of the Applicant, Manager and Sponsor
- Shareholding pattern(in case of a company), Beneficial ownership pattern (in case of LLP) and profile of the directors/partners.
- Copies of the financial statement for the previous financial year.
- Details of experience of Sponsor(s) and Managers in advising or managing pools of capital or in fund or Asset or wealth or portfolio management or in the business of buying, selling and dealing of securities or other financial assets.
- Details of business plan and investment strategy include the investment objective, investment style, target investors, target industries/sectors, proposed corpus, the fee to the sponsor and manager, tenure of fund and details of any regulatory action taken in the past if any.
OTHER INFORMATION/ DECLARATIONS
- Copies of commitment letters from the sponsor/manager specifying the amount contributed/ proposed to be contributed by the sponsor(s)/manager(s) as per the relevant Regulation of SEBI (Alternative Investment Funds) Regulations, 2012.
- Declaration that :
- The applicant shall comply with the provisions of regulation 10 with respect to investment in the AIF.
- The applicant shall comply with the provisions of regulations 15 and 16 with respect to general investment conditions for the applicable category.3.
- The applicant, Sponsor and Manager are fit and proper people based on the criteria specified (Enclose a declaration to that effect).
FEE STRUCTURE
The statutory fees for registration of different categories and re-registration are specified in the table below:
| Application fee | 1,00,000/- |
| Registration fee for Category I Alternative Investment Funds other than Angel Funds | 5,00,000/- |
| Registration fee for Category II Alternative Investment Funds other than Angel Funds | 10,00,000/- |
| Registration fee for Category III Alternative Investment Funds other than Angel Funds | 15,00,000/- |
| Scheme Fee for Alternative Investment Funds other than Angel Funds | 1,00,000/- |
| Re-registration Fee | 1,00,000/- |
| Registration Fee for Angel Funds | 2,00,000/- |
The registration process of AIF is hassle-free if all the required information and documents have been provided. SEBI scrutinize all the documents, information and records submitted and, once satisfied, issue a registration certificate.
Upon receipt of the certificate, AIF is strictly required to comply with all the compliances that apply to a registered AIF. For more details on post-registration compliance, please refer to our blog “Compliance Insights – Alternative Investment Funds In India”.
- DECODING THE REGISTRATION PROCESS OF ALTERNATIVE INVESTMENT FUNDS IN INDIA - October 7, 2021
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