Alternative Investment Fund Registration
Registration under AIF officially permits an investor to avail benefits for investing or getting funds. Contact Filecrat Team for Expert Advice regarding AIF.
Alternative Investment Fund Registration
Alternative Investment Fund Registration(AIF) is a privately pooled investment vehicle which collects funds from investors, whether Indian or foreign, for investing it in accordance with a defined investment policy for the benefit of its investors. AIF was established by the Securities and Exchange Board of India (SEBI) in 2012 under SEBI (Alternative Investment Funds) Regulations, 2012. It facilitates the best possible investment platform to the investors and invests in assets classes other than bonds and cash. AIF Registration aims to focus on the investors and their investments as it collects funds and invest the same for the benefit of the investor. It is becoming more popular these days for security of the investors.
Registration under AIF officially permits an investor to avail benefits for investing or getting funds. AIF only includes venture capital fund, private equity funds, debt funds, etc.
Categories for AIF Registration
Category 1: This category includes AIFs which invest their funds in startups or in early stage ventures or social ventures such as venture capital funds, SME fund, social venture funds, infrastructure funds, etc. SEBI and government provide incentives to the AIFs under this category because these AIFs are of great advantage to developing economy of India.
Category 2: AIFs of this category are not allowed to borrow except for day to day operational requirements. It includes debt funds, private equity funds, etc.
Category 3: This category AIFs employ diverse or complex trading strategies and may employ leverage including through investment in listed or unlisted derivatives, such as hedge funds and PIPE (Private Investment in Public Equity) funds to make short term returns or such other funds which are open ended and for which no specific incentives or concessions are given by the government.
Eligibility Criteria for AIF Registration
- The applicant can be either a resident Indian or a Non-Resident Indian (NRI).
- It will be checked whether the applicant has clearly described the investment objective, the targeted investors, proposed corpus, investment style or strategy and proposed tenure of the fund or scheme.
- The incorporation document of the applicant must allow it to carry on the activities related to AIF.
- The incorporation document of the applicant must prohibit from invitation to public for subscription of securities.
- The applicant must be duly registered under the law which it was incorporated. A trust deed must be registered under Registration Act 1908. An LLP must be incorporated and the partnership deed should be registered under Limited Liability Partnership Act 2008. A company must be established under the laws of Central or State Legislature and be allowed to carry on the activities of an AIF.
- The applicant, Sponsor and Manager must be fit and proper persons based on the criteria specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008.
- The key team of the Manager of Alternative Investment Fund must have adequate experience, with at least one key personnel having minimum five years of experience 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 and has relevant professional qualification.
- The Manager or Sponsor should have the necessary infrastructure and manpower to effectively discharge its activities.
- It will be checked whether an applicant established by the Sponsor or Manager has earlier been refused registration by the Board or not.
Prohibited Entities to Register AIFs
- Trust/ Gratuity registered with principal objective of benefit of the employees.
- Trust created by a Hindu-Undivided Family aiming at the benefits of family members and relatives.
- ESOP (Employee stock ownership plan) trusts registered under SEBI.
- Other entities not having a status of fund manager.
Registration Process
STEP 1: An applicant has to make an application in a prescribed format in accordance with Form-A mentioned under SEBI (AIF) Regulations 2012 and has to pay the prescribed fees and submit the same application to SEBI along with required documents.
STEP 2: On receiving an application, SEBI will verify and reply the applicant within 21 working days. Subsequently, after the verification of documents and satisfaction of the correctness of documents, SEBI will approve the application.
STEP 3: After approval, the issuance of certificate of AIF registration will be followed by submission of the following registration fee depending upon the category of AIF:
- Category-I: Rs. 5 Lakhs
- Category-II: Rs. 10 Lakhs
- Category-III: Rs. 15 Lakhs
Compliances of a Registered AIF
- Compliance with all the specified reporting requirements to SEBI.
- Compliance with all the new requirements and guidelines of SEBI. AIF needs to regularly visit SEBI website for new circulars and guidelines.
- Any amendment/ change/ addition in the submitted details to SEBI should be formally intimidated to SEBI in written.
What's Included
- Advisory on Registration
- AIF Business Plan
- Application Drafting
Documents Required
- Incorporation certificate/ trust deed/ partnership deed
- Copy of Memorandum of association
- Business plan and details of the investment strategies
- Authorization Letter, in case a company has authorized any director/ promoter/ officer to act as an authorized signatory on the AIF application.
- Draft of Rs. 1 lakh drawn in favour of the Securities and Exchange Board of India (SEBI), payable at Mumbai
- Cover letter: It is compulsory for an applicant to mention under cover letter whether it is registered as a venture capital funds or not. In case of a registered AIF in cover letter an applicant has to mention that he is seeking the registration for a new fund.
FAQ's
SEBI is the governing authority for AIF registration under the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012 which came into effect on May 21, 2012.
Debt fund is an Alternative Investment Fund (AIF) which invests primarily in debt or debt securities of listed or unlisted investee companies according to the stated objectives of the Fund. These funds are registered under Category II. In this regard, it is clarified that, since AIF is a privately pooled investment vehicle, the amount contributed by the investors shall not be utilised for purpose of giving loans
These are the types of investment funds which manages the monies of investors seeking private equity stakes in start-up and other established small and medium entities with promising potential of growth. Further it includes high risk but also high-return opportunities.
“Angel fund” is a sub-category of Venture Capital Fund under Category AIF that raises funds from angel investors and invests in accordance with the provisions of Chapter III-A of AIF Regulations. In case of an angel fund, it shall only raise funds by way of issue of units to angel investors.
"Angel investor" means any person who proposes to invest in an angel fund and satisfies one of the following conditions, namely, (a) an individual investor who has net tangible assets of at least two crore rupees excluding value of his principal residence, and who: (i) has early stage investment experience, or (ii) has experience as a serial entrepreneur, or (iii) is a senior management professional with at least ten years of experience; ('Early stage investment experience' shall mean prior experience in investing in start-up or emerging or early-stage ventures and 'serial entrepreneur' shall mean a person who has promoted or co-promoted more than one start-up venture.) (b) a body corporate with a net worth of at least ten crore rupees; or (c) an AIF registered under these regulations or a VCF registered under the SEBI (Venture Capital Funds) Regulations, 1996. Angel funds shall accept, up to a maximum period of 3 years, an investment of not less than Rs. 25 lakh from an angel investor
The board may Grant the Registration if:
- It is satisfied that the applicant has fulfilled the requirements as specified in the regulations.
- On receipt of the registration fees as described under second schedule, Board may grant the registration in accordance with Form-B.
- The registration must be granted with such conditions as may be deemed appropriate by the court. And such conditions are-
- The Alternative Investment Fund shall accept or act by the provisions of the Act and these regulations.
- The Alternative Investment Fund shall carry the permitted activities and not any other activity.
- If the information or particulars submitted to Board previously are found to be false or misleading or if there is any material change in the information already submitted, an AIF shall inform the Board about the same in writing.
- The maximum member of AIF (does not include Angel Funds) shall not exceed 1000
- No scheme under angel funds shall exceed 49 investors
AIF can raise funds through private placements and cannot invite public for the subscription of its shares.
The registration fees as per Second Schedule of SEBI (AIF) Regulations, 2012 for all the categories is different and which are as follows -
- Application fee for AIF registration under SEBI is Rs. 1 Lakh which is not required for the existing AIF members.
- Re-Registration fee is Rs. 1 Lakh
- Scheme fee is Rs. 1 Lakh
- After approval, the issuance of certificate of AIF registration will be followed by submission of the following registration fee depending upon the category of AIF:
- Category-I: Rs. 5 Lakhs
- Category-II: Rs. 10 Lakhs
- Category-III: Rs. 15 Lakhs
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