SEBI/HO/AFD/AFD - POD - 1/P/CIR/2024/112

circulars · 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/2024/112 August 19, 2024 To, All Alternative Investment Funds (AIFs) Sir/Madam, Sub: Guidelines for borrowing by Category I and Category II AIFs and maximum permissible limit for extension of tenure by LVFs Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012 ("AIF Regulations " ) have been amended and notified on August 06, 2024 , with respect to (i) norms for borrowing by Category I and Category II AIFs , and (ii) maximum permissible limit for extension of tenure by Large Value Fund for Accredited Investors (LVFs) . Copy of the aforesaid notification is available at link . A. Guidelines for borrowing by Category I and Category II AIFs In terms of Regulation 16(1)(c) and Regulation 17(c) of AIF Regulations, Category I and Category II AIFs shall not borrow funds directly or indirectly or engage in any leverage for the purpose of making investments or otherwise, except for borrowing funds to meet temporary funding requirements and day-to-day operational requirements for not more than thirty days, on not more than four occasions in a year and not more than ten percent of the investable funds and subject to such conditions as may be specified by SEBI from time to time. In this regard, in order to facilitate ease of doing business and provide operational flexibility , it has been decided to allow Category I and Category II AIFs to borrow for the purpose of meeting temporary shortfall in amount called from investors for making investments in investee companies ('drawdown amount') . Category I and Category II AIFs may borrow for the purpose of meeting shortfall in drawdown amount, subject to the following additional conditions: 4.1. If AIF intends to borrow funds for meeting shortfall in drawdown amou

Rule TOC

4 · 1. If AIF intends to borrow funds for meeting shortfall in drawdown amount, the same shall be disclosed in the PPM of the scheme.

4 · 2. Such borrowing shall be done only in case of emergency and as a last recourse, when the investment opportunity is imminent to be

4 · 3. The amount borrowed shall not exceed twenty per cent of the investment proposed to be made in the investee company, or ten per cent of the investable funds of the scheme of AIF, or the commitment pending to be drawn down from investors other than the investor(s) who has failed to provide the drawdown amount , whichever is lower.

4 · 4. The cost of such borrowing shall be charged only to investor(s) who failed to provide the drawdown amount for making investments.

4 · 5. The flexibility of borrowing to meet shortfall in drawdown amount shall not be used as a means to provide different drawdown timelines to investors.

4 · 6. The manager shall disclose the details with respect to amount borrowed, terms of borrowing and repayment to all the investors of the AIF/scheme, on a periodic basis as per the terms of agreement with the investors of the AIF.

7 · 1. Existing LVF schemes who have not disclosed definite period of extension in their tenure in the PPM or whose period of extension in tenure is beyond the permissible five years, shall align the period of extension in tenure with the requirement as given at para 6 above , within three months from the date of this circular, i.e., on or before November 18, 2024 .

7 · 2. While realigning the period of extension in tenure , LVF schemes shall have the flexibility to revise their original tenure subject to the consent of all the investors of the scheme .