Flexibility to Alternative Investment Funds and their investors

Flexibility to Alternative Investment Funds (AIFs) and their investors to deal with unliquidated investments of their schemes

1. Securities and Exchange Board of India (Alternative Investment Funds) (Second Amendment) Regulations 2024 (“AIF Regulations Amendment”), have been notified on April 25, 2024, inter alia, to provide additional flexibility to AIFs and their investors to deal with unliquidated investments of their schemes. Copy of the notification is available at link.
   
2. Dissolution Period:
   
   2.1.Regulation 2(1)(ia) of AIF Regulations states as under – ““dissolution period” means the period following the expiry of the liquidation period of the scheme for the purpose of liquidating the unliquidated investments of the scheme of the Alternative Investment Fund.”
   
   2.2. Regulation 29(9) of AIF Regulations states as under –“Notwithstanding anything contained in sub-regulation (7), during liquidation period of a scheme, an Alternative Investment Fund may distribute investments of a scheme which are not sold due to lack of liquidity, in-specie to the investors or enter into the dissolution period, after obtaining approval of at least seventy five percent of the investors by value of their investment in the scheme of the Alternative Investment Fund, in the manner and subject to conditions specified by the Board from time to time.Provided that in the absence of consent of unit holders for exercising the options under sub-regulation (9) during liquidation period, such investments of the scheme of the Alternative Investment Fund shall be dealt with in the manner as may be specified by the Board from time to time.”
   
   2.3.In this regard, the following conditions are specified –
   2.3.1.Before seeking the requisite investor consent, the AIF/ manager shall arrange bid for a minimum of 25% of the value of its unliquidated investments. The bid shall be arranged for units representing consolidated value of all unliquidated investments of the scheme’s investment portfolio. The manager may arrange bids from multiple bidders in this regard.

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