On 9th November 2021 Securities and Exchange Board of India(“SEBI”) has notified amendments to Securities and Exchange Board of India (Alternative Investment Funds) Regulations 2012 (“SEBI AIF REGS”) and Securities and Exchange Board of India (Portfolio Managers) Regulations 2020 (“SEBI PMS REGS”) permitting Managers of Alternative Investment Funds (“AIF’s”)under Category I and Category II registered with SEBI under SEBI AIF REGS to offer conditional Co Investment Opportunities to existing Unitholders /Limited Partners of AIF Funds in unlisted investee companies in which AIF has invested .
To provide Co Investment Opportunities to Unitholders/Limited Partners the Manager is obliged register with SEBI as Co-Investment Portfolio Manager under SEBI PMS REGS.
- Co-Investment Portfolio Manager can provide services:
- only to Unitholders of Category I and/or Category II AIF; and
- only in respect of unlisted securities of investee company in AIF Fund has made investment.
- co-investment opportunity will be for the unitholders of Funds managed or sponsored by the Manager or Sponsor.
Also Read: Foreign investment in Alternative Investment Funds (AIFs)
- Co-Investment Offer should on following terms:
- The terms of Co-Investment in a investee company by a Manager or Sponsor or co investor shall not be more favorable than the terms of investment of the Alternative Investment Fund including terms of exit from Co Investment in a investee company including the timing of exit should identical. This requirement identical exit terms will apply from 9th November 2021 only.
- Co Investment Portfolio Manager has been granted several concessions from various requirement under SEBI PMS REGS interalia the following:
- Key Team member can qualify as Principal Officer
- No requirement of minimum Net Worth of Rs 5 crore.
- No need raise NetWorth independently or capital adequacy for each activity etc.
- No need for maintain Nrworth on Continued basis.
- Exemption from applying time weightage rate of return while determining performance which can be purely determined on contractual basis.
- Exemption mandatory disclosure of Diclosure Document on the Website
- Exemption from minimum investment amount for accepting co investment.
- Renewal of Investment being considered as the fresh investment.
- 100% Investment of Co investment in one investee company possible.
- Exemption from appointment of custodian.
- No need of separate compliance officer, principal officer can double up as compliance officer also.
- Few other requirements on Co Investor:
- Cannot seek pre mature withdrawal from investee company , only pro rata withdrawal with the Fund possible.
Disclaimer: This article provides general information existing at the time of preparation and we take no responsibility to update it with the subsequent changes in the law. The article is intended as a news update and Affluence Advisory neither assumes nor accepts any responsibility for any loss arising to any person acting or refraining from acting as a result of any material contained in this article. It is recommended that professional advice be taken based on specific facts and circumstances. This article does not substitute the need to refer to the original pronouncement.
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