Sebi has amended AIF Regulations to provide flexibility to Alternative Investment Funds to deal with investments of their schemes which are not sold due to lack of liquidity during the winding-up process by either selling such investments to a new scheme of the same AIF or distributing such unliquidated investments in-specie.
If the AIF during the period of Liquidation decides to launch Liquidation Scheme then the consent of 75% of the investors by the value of their investments in the Original Scheme shall require to be obtained and the scheme launched by the liquidator will require “Liquidation Scheme” in its name.
After obtaining the consent of investors the AIF shall arrange for a minimum of 25% bid of the value of the unliquidated investment. A bid shall be arranged for units representing the consolidated value of each unliquidated investment of the Original Scheme.
The investors who did not consent to sell the unliquidated investments shall be offered to fully exit the Original Scheme out of the 25% bid arranged by the AIF. The bidders or related parties in the Original Scheme shall not be provided to exit out of the bid from the Original Scheme.
The Liquidation Scheme shall allot its units to the Original Scheme for purchasing investments in the manner specified. On the launch of the Liquidation Scheme, the Original Scheme shall be wound up prior to the expiry of the Liquidation Period of the Original Scheme.
As Liquidation Scheme has been exempted from obtaining SEBI’s comments on the PPM the tenure of the scheme shall be from the date of filing of the PPM with SEBI and shall not be more than the tenure of the Original Scheme.
Performance of the Liquidation Scheme shall also be reported to Performance Benchmarking Agencies.
If the AIF fails to obtain consent for the launch of the Liquidation Scheme the unliquidated investments shall be distributed to investors mandatorily without requiring to obtain consent of 75% of investors by their value of investment in the scheme. Further, the value of such investments shall be recognised at Rupee one for reporting to Performance Benchmarking Agencies and the investments of the investor unwilling to take the in-specie distribution shall be written off.
The manager, trustee, and KMP of AIF shall be responsible for compliance with the procedure prescribed.
The manager shall submit a report on compliance with the provisions of this circular on the SEBI intermediary Portal in the format specified therein.
The manager shall report the value of unliquidated investments to Liquidation Scheme in terms of sale or distribution to the Benchmarking Agencies in a timely manner for the purpose of performance benchmarking. The manager shall also make suitable disclosure with regard to the same in the PPMs of subsequent schemes.
The trustee/sponsor of AIF, as the case may be, shall ensure that the ‘Compliance Test Report’ prepared by the manager includes compliance with the provisions of this circular.
This circular shall come into force with immediate effect
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