A. Master Circular for AIFs
SEBI has effectively consolidated and provided us with a ready reckoner for AIF related laws (issued up to March 31, 2023 and effective as on date) through the Master Circular for AIFs (Master Circular) issued by SEBI on July 31, 2023.
The Master Circular has succinctly captured the circulars issued pertaining to (i) online filing system for AIFs; (ii) filing of the PPM and related compliance requirements; (iii) registration related clarifications; (iv) investment in AIFs; (v) operational and prudential norms for category III AIFs; (vi) norms for special situation funds; (vii) guidelines for overseas investments by AIFs and related reporting; (viii) investment in units of AIFs; (ix) participation of AIFs in credit default swaps; (x) transaction in corporate bonds through RFQ platform by AIFs; (xi) other prudential and operational norms and related clarifications; (xii) framework for accredited investors; (xiii) obligation of manager, sponsor and trustee of AIFs; (xiv) constitution of investment committee; (xv) reporting by AIFs; (xvi) performance benchmarking of AIFs; (xvii) investor charter and disclosure of complaints by AIFs; (xviii) collection of stamp duty on issue, transfer and sale of units of AIFs; and (xix) change in sponsor and/or manager or change in control of sponsor and/or manager of AIF.
However, it is important to remember that circulars providing temporary relaxations with regard to certain compliance requirements for AIFs and circulars with regard to market intermediaries, which may be applicable on AIFs, have not been included in the Master Circular. The circulars mentioned in Annexure 19 of the Master Circular shall stand rescinded with the issuance of the Master Circular. Nevertheless, all action taken under such rescinded circulars will hold good and will remain unaffected as if the rescinded circulars have never been rescinded.
B. Modification in the validity period of SEBI approval for overseas investment by AIFs
AIFs are allowed to invest in equity and equity linked instruments of offshore unlisted companies subject to an overall limit of USD 1500 million (combined limit for AIFs and VCFs), with prior approval from SEBI and as permitted under other applicable laws. Such investments are also bound by the diversification limits specified by SEBI for AIFs.
AIFs need to apply to SEBI for allocation of overseas investment limit. Previously, the AIFs had 6 months to make such allocated investments in offshore VCUs, from the date of SEBI approval. In case the AIF did not utilise (or partly utilised) the limits allocated within the aforesaid time period, the AIF would need to report the same within 2 working days after the expiry of the 6 months' period and SEBI is entitled to allocate such unutilised limit to other AIFs.
SEBI, vide its circular of August 4, 2023 has reduced the said time period of 6 months to 4 months so that the allocated limit is efficiently utilised and if not utilised fully, the same is again available to other AIFs / VCFs in a shorter time span. Such reduced time period is only applicable to SEBI approvals granted post August 4, 2023.