India funds given six months to comply with new regulations

This clarification was announced on Monday as part of the Securities and Exchange Board of India's (SEBI) notification of the AIF regulations announced in April. Offshore funds investing in the country are not affected by the changes. Rather, it is an attempt to update the current domestic venture capital funds (VCF) system, which is seen as unwieldy because classification requirements are so broad and unsafe because there is no mandatory registration.

An AIF is defined as a fund incorporated in India as a trust, company, limited liability partnership or body corporate, which is a privately pooled investment vehicle that collects capital from investors. Private equity, venture capital and hedge funds are the principal targets.

SEBI published draft regulations in August 2011 and invited public comment. A desire to have funds clearly delineate their investment purposes - and stick with them - led to an initial proposal for nine sub-categories, ranging from private equity vehicles to social venture funds. Critics denounced the approach as too repressive and the compromise position is three categories that reflect the varying degrees of social benefit and risk offered by different kinds of vehicles.

VCFs may continue as before, provided they don't attempt to increase their targeted corpus. Registration under the AIF system requires approval from two-thirds of LPs, based on investment value. In certain cases, SEBI may extend the compliance deadline by up to 12 months.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• South Asia
• Regulation
• India
• regulation
• SEBI