Overview

An alternative investment fund in the form of a trust, company, LLP or body corporate has been set up to raise funds from trusted investors (Indian or foreign) in India, in order to return profits to the investors as per the defined investment policy Can be invested as. Form of Return on Investment. AIFs include venture capital, private equity funds, debt funds, etc.

AIFs are privately pooled investment vehicles. Generally, AIFs collect funds from investors and then infuse such funds for investment by providing return on investment to the investors. They provide investors with a risk / return profile different from equities, bonds, etc. They are slightly related to bonds or stocks, provide excellent returns and are less volatile.

Different Categories

The following categories are:-

• Category-I AIF:

  This type of AIFs mainly invest in startups, early stage ventures, social undertakings, infrastructure funds, SMEs etc. These AIFs are beneficial in growing the overall Indian economy, thus being encouraged by SEBI and the government.

• Category-II AIF:

  These funds are not allowed to be borrowed for any purpose other than day to day transactions. These funds invest in any form of combination and include private equity funds, real estate private equity funds, debt funds, etc.

• Category-III AIF:

  Under these funds, short-term investments are made, and later they are sold as hedge funds to make short-term gains. Various hedge funds, PIPE funds, etc. form this category of AIFs.

Eligibility Criteria

To be registered as AIF, the following conditions must be met:

• An entity shall be restricted through its MOA & AOA to invite the public for subscribing to its shares.
The maximum number of investors shall not exceed 1000 at any point of time.
• The Trust Trust, duly registered under the Registration Act 1908, will also be furnished in the case of an applicant for the AIF registered registered trust.
When the applicant is LLP, and such work will be duly registered under the LLP Act 2008.
• A partnership deed is essentially furnished.
• Investors of AIF will be Indian or NRI.

Disqualification Criteria

As per SEBI guidelines, the following entities are not allowed to be registered as AIFs:

• Trustor gratuity is registered whose main purpose is employee benefits.
• Any family trust is registered with the primary purpose of providing benefits to relatives.
• ESOP Trust is registered under SEBI.
• No other entities are established as fund managers.

Registration Process

Following the registration process of Alternative Investment Funds are as follows:

• An applicant will apply along with the following documents required along with SEBI (Alternative Investment Fund) Regulations, 2012:
• Details of registered addresses such as name, address, etc.
• Registration certificate of the company
• Name and Contact details of applicant such as contact number, E-mail Id, residential address
• Partnership deed, in case the applicant is registered LLP
• Trust deed, in case an applicant is a trust
• Business strategies and investment plans
• A draft copy of placement memorandum

• Final submission of application:

  In this regard, online application is filed as per SEBI guidelines. Form A filled, numbered, duly signed and stamped as required through a draft drawn in favor of the Securities and Exchange Board of India payable in Mumbai will be payable in Mumbai along with the required documents and application fee of INR 100000. Of registration.

• Testing an application:

  SEBI will verify and respond to the applicant within 21 days of receipt of the application. The application is evaluated by SEBI and SEBI for its correctness, the application will be approved if satisfied.

• Grant of Registration Certificate:

  On approval of SEBI, an applicant will submit the following registration fee for issuing registration certificate:

  • INR 500000: If the applicant for AIF registration is of category-I

  • INR 100000: If the applicant for AIF registration is of category-II

  • INR 1500000: If the applicant for AIF registration is of Category-III

• Such evidence is valid for the lifetime of the AIF unless it is a wound.

Alter Native Investment fund ban

There are some following restrictions:

• AIF is allowed to raise funds through private placements.
• AIF cannot accept investment of less than INR 1 crore from an investor.
• More than 1000 investors are not allowed under this fund, the corpus limit of each scheme will be INR 20 crores.
• The promoter, sponsor, or manager must continue with at least one of the following interest:
• a) 2.5% of the initial corpus
• b) INR 5 Crore
• AIF registered under Category-I and Category-II is not allowed to invest 25% or more of its investment fund in a single investment company. While the same limit for Category-III AIF is 10%.
• AIF is allowed to be listed on the stock exchange at the stock exchange up to a minimum of INR 1 of a trading lot after the scheme or fund is closed.

Restriction on number of investors

Following are the limits on the number of investors:

• AIF (other than Angel Funds) cannot have more than 1000 investors at any given time.
• In case of Angel Funds, no scheme can have more than 49 investors at any given time.
• AIF is allowed to raise funds through private placements and cannot invite the public to subscribe to its shares.

Grievance

Investors who have any complaint or grievance against the AIF will redress the same. For this purpose, SEBI has established a web-based centralized grievance redressal system known as SCORES (SEBI Grievance Redressal System).

AIF will resolve the dispute through its manager / sponsor / promoter in the form of arbitration or other such mechanism, as decided on mutual terms between the investors and AIF.