Answer ... Alternative investment funds (AIFs) must register with the Securities and Exchange Board of India (SEBI) under the SEBI (Alternative Investment Funds) Regulations, 2012 (‘AIF Regulations’), necessitating the submission of a private placement memorandum (PPM) to SEBI.

Within the International Financial Services Centre (IFSC), situated in Gujarat International Finance Tec (GIFT) City, India, funds and entities acting as fund management entities operate under the regulatory framework established by the International Financial Services Centres Authority (IFSCA) and must be registered with IFSCA.

Please see question 3.3 and question 1.1 for more information.

Answer ... In deciding whether to grant a certificate and authorisation, SEBI assesses eligibility based on the following conditions:

• The applicant’s constitutional documents (memorandum of association for a company, trust deed for a trust or partnership deed for a limited liability partnership (LLP)) must authorise it to operate as an AIF.
• The applicant must be restricted by its constitutional documents from making a public invitation for securities subscriptions.
• In the case of a trust, the trust instrument must be in the form of a deed and must have been duly registered under the Registration Act, 1908.
• If the applicant is an LLP, it must be properly incorporated and the partnership deed must have been duly filed with the registrar of companies under the Limited Liability Partnership Act, 2008.
• If the applicant is a body corporate, it must be established under central or state laws and must be permitted to engage in AIF activities.
• The applicant, sponsor and manager must be considered fit and proper persons based on the criteria specified in Schedule II of the SEBI (Intermediaries) Regulations, 2008.
• The key investment team of the manager must have at least one key member of personnel with a relevant certification and another with professional qualifications in finance, accountancy, business management, commerce, economics, capital market or banking, as specified by SEBI.
• The manager or sponsor must have the necessary infrastructure and manpower for effective operations.
• The applicant must clearly outline the investment objective, targeted investors, proposed corpus, investment style or strategy and proposed tenure of the fund or scheme at the time of registration.
• Verification must be conducted to ensure that neither the applicant nor any entity established by the sponsor or manager has previously been refused registration by SEBI.

Answer ... SEBI has established a prescribed application form for AIF registration, which must be accompanied by the AIF’s foundational documents and the PPM. This submission is facilitated through a SEBI registered merchant banker. Key parties to the AIF, such as the manager and sponsor, must provide certain declarations and undertakings, along with a disciplinary history.

Upon ensuring that the applicant, the AIF manager and the sponsor meet the eligibility criteria, the next step involves the submission of an application for the issuance of a certificate under the designated categories outlined in the AIF Regulations. This application is facilitated through the completion of Form A, as delineated in the First Schedule of the AIF Regulations. Concurrently, the applicant must remit the non-refundable application and registration fees, the details of which are stipulated in the Second Schedule of the AIF Regulations.

A registered merchant banker, appointed by the manager, conducts a thorough vetting of the placement memorandum and declarations. If deemed adequate, a due diligence certificate is issued by the merchant banker, stating that the disclosures are sufficient for submission to SEBI, along with the relevant documents. The merchant banker is also responsible for incorporating SEBI’s comments into the placement memorandum. An exemption is granted to large-value funds for accredited investors, subject to specific conditions.

The entire application process is conducted online. According to the AIF Regulations, SEBI is mandated to approve or reject the application within 30 days. SEBI may request additional information or documents during this period. Usually, the establishment and registration process typically takes three to five months, encompassing the time required for SEBI’s evaluation of the application. This includes the timeframe for submission of the fund documentation and AIF application (pre-formation formalities), which usually takes around a month.

Amount to be paid as fees (as per Second Schedule of AIF Regulations):

Process flow for setting up an AIF in India as per the AIF Regulations:

The establishment and registration process with the IFSCA typically takes two to three months, encompassing the time required for SEBI to evaluate the application.

Process flow for setting up an AIF in GIFT City: