Alternative Investment Funds (AIFs) have gained significant traction among investors looking for diversified opportunities beyond traditional asset classes. While the basics of AIFs are widely known, navigating the AIF registration process with the Securities and Exchange Board of India (SEBI) requires a deep understanding of compliance, documentation, and regulatory expectations.
AIFs are classified into three categories, and selecting the right one is crucial:
Category I AIFs: These invest in start-ups, SMEs, infrastructure projects, and other socially or economically beneficial sectors.
Category II AIFs: These funds do not take leverage (except for operational purposes) and invest in private equity, debt funds, and other unclassified investments.
Category III AIFs: These are hedge funds and other funds that trade with diverse or complex strategies and may use leverage.
The choice of category dictates compliance requirements, tax implications, and investment strategies, so it's essential to assess your fund’s objectives before proceeding.
Before applying for registration, the fund must be structured as a trust, company, LLP, or body corporate. Most AIFs in India are registered as trusts due to operational flexibility.
Several documents must be prepared and submitted, including:
Memorandum of Association (MoA) and Articles of Association (AoA) (for companies)
Trust Deed (for trust-based AIFs)
Investment Strategy & Policy
Fund Structure and Governance Framework
Details of Key Management Personnel
Track Record & Financial Standing of the Sponsor/Manager
Ensuring compliance with SEBI’s guidelines in these documents is critical for smooth processing.
The application must be submitted online through SEBI’s Intermediary Portal along with Form A and a non-refundable fee. The applicable fees are:
Category I & II AIFs: INR 5 lakh
Category III AIFs: INR 15 lakh
Additionally, SEBI may seek clarifications or additional documentation during the review process.
SEBI evaluates the application based on:
Legal structure and regulatory compliance
Fund manager and sponsor qualifications
Investment strategy and investor protection measures
The review process typically takes 6 to 8 weeks, but delays may occur if clarifications are required.
Once SEBI is satisfied with the application, it issues an AIF Registration Certificate, allowing the fund to commence operations.
After obtaining registration, AIFs must adhere to ongoing compliance requirements, including:
Quarterly & Annual Reporting to SEBI
Maintaining Transparent Disclosures for investors
Compliance with Investment Restrictions (specific to each category)
Non-compliance can lead to penalties, restrictions, or even cancellation of registration.
AIF registration is a meticulous process requiring detailed planning and regulatory adherence. Ensuring proper structuring, documentation, and compliance will facilitate smooth approval and operational success. Seeking professional guidance can significantly streamline the process, minimizing delays
