The Securities Exchange Board of India (“SEBI”) vide a circular dated November 22, 2021 (“November 22nd Circular”) has issued clarifications regarding the amendments made to the SEBI (Alternative Investment Funds) Regulations, 2012 (“AIF Regulations”) vide a gazette notification dated November 9, 2021 (“November 9th Notification”).
The November 9th Notification amended regulation 15(1)(d) of the AIF Regulations to allow category III Alternate Investment Funds (“AIF”), including any large value funds for accredited investors of category III AIFs, to calculate the concentration norm based on Net Asset Value (“NAV”) of the fund for investment in listed equity of an investee company. The November 22nd Circular provided the following clarifications with respect to the November 9th Notification:
Regulation 2(1)(fa) was inserted in the AIF Regulations vide the November 9th Notification to include the definition of the term co-investment:
“’Co-investment’ means investment made by a Manager or Sponsor or investor of Category I and II Alternative Investment Fund(s) in investee companies where such Category I or Category II Alternative Investment Fund(s) make investment:
Provided that Co-investment by investors of Alternative Investment Fund shall be through a Co-investment Portfolio Manager as specified under the Securities and Exchange Board of India (Portfolio Managers) Regulations, 2020;”
The November 22nd Circular clarifies that the requirement of appointment of a custodian, as provided under regulation 20(11) of AIF Regulations, shall be applicable, if the sum of corpus of the AIF and the value of the co-investment managed by the manager of the AIF as co-investment portfolio manager, exceeds five hundred crore rupees.
Please find a copy of the November 22nd Circular, here and a copy of the November 9th Notification, here.
This update has been contributed by Vinod Joseph (Partner) and Aishwarya Manjooran (Associate).
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