SEBI/HO/AFD/AFD - POD - 1/P/CIR/2024/175

regulations · 1992 · State unknown

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Parent: THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 (7c4c1f5343adab106c3a94cafc08a5ecf5957ae7)

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CIRCULAR SEBI/HO/AFD/AFD - POD - 1/P/CIR/2024/175 December 13 , 2024 To, All Alternative Investment Funds (AIFs) Sir/Madam, Sub: Pro -rata and pari-passu rights of investors of AIFs Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012 ("AIF Regulations " ) have been amended and notified on November 18, 2024 , with respect to maintaining pro-rata and pari-passu rights of investors in a scheme of an AIF. Copy of the aforesaid notification is available at link . A. Pro -rata rights of investors of AIFs - Regulation 20(21) of AIF Regulations states as under – "The investors of a scheme of an Alternative Investment Fund shall have rights, pro-rata to their commitment to the scheme, in each investment of the scheme and in the distribution of proceeds of such investment, except as may be specified by the Board from time to time: Provided that the rights of the investors of a scheme of Alternative Investment Fund issued prior to the notification of the Securities and Exchange Board of India (Alternative Investment Funds) (Fifth Amendment) Regulations, 2024, which are not pro-rata to their commitment to the scheme and not exempted by the Board, shall be dealt with in the manner specified by the Board." In this regard, it is specified that the requirement of maintaining investors' rights pro -rata to their commitment to the scheme, shall not be applicable in an investment of a scheme and distribution of proceeds of the investment to the extent – 3.1. an investor has been excused or excluded from participating in the said investment; or , 3.2. an investor has defaulted on providing his/her pro-rata contribution for the said investment. Further , the requirement of maintaining pro-rata rights of investors in distribution of proceeds of investments

Rule TOC

3 · 1. an investor has been excused or excluded from participating in the said investment; or ,

3 · 2. an investor has defaulted on providing his/her pro-rata contribution for the said investment.

11 · Regulation 20(22) of AIF Regulations states as under –

12 · 1.Any such right shall not result in any investor bearing liability accrued or accruing to other investors of the AIF/scheme of AIF;

12 · 2.Any such right with respect to non-monetary / non-commercial terms shall not provide control to an investor on the decision making of the AIF/scheme of AIF, except in cases where investor/its nominee is part of any committee set up in terms of Regulation 20 (7) of AIF Regulations;

12 · 3.Any such right shall not alter the right(s) available to other investors under their respective agreements with the AIF/manager; and,

12 · 4.Any such right and eligibility to avail the same shall be transparently disclosed in the PPM of the AIF/scheme of the AIF .

15 · 1.The differential rights shall be provided only in accordance with the implementation standards formulated by SFA .

15 · 2.The following shall be disclosed in the PPM -

17 · 1.The manager shall report the details of differential right(s) which do not fall under the implementation standards formulated by SFA , to SEBI in the format as given at Annexure I, by emailing to aifreporting@sebi.gov.in, on or before February 28 , 2025 .

17 · 2.Out of the rights reported to SEBI as per para 17.1 . above, the manager shall immediately terminate/discontinue those differential rights which are ascertained to be affecting the rights of other investors .

18 · 1.Making appropriate disclosure in the PPM of the scheme; and,

18 · 2.Obtaining undertaking from accredited investor at the time of on-boarding to LVF in terms of para 4.1 of Annexure 8 of SEBI Master Circular for AIFs dated May 07, 2024, with the following clause inserted for waiver to this effect –