SEBI Empowers AIFs to Retain Liquidation Proceeds Beyond Fund Life

The Securities and Exchange Board of India (SEBI) has introduced landmark regulatory changes to provide Alternative Investment Funds (AIFs) with greater operational flexibility during the winding-up process. These new guidelines allow funds to hold onto liquidation proceeds even after their permissible life has ended, ensuring they can meet unforeseen liabilities and administrative costs.

New Framework for Retaining Liquidation Proceeds

Under the amended SEBI (Alternative Investment Funds) Regulations, AIFs or their specific schemes can now retain proceeds beyond the formal liquidation or dissolution period under three specific conditions. First, if the fund has received litigation notices or regulatory demands from tax authorities, law enforcement, or courts—even if the liabilities have not yet crystallized. Second, if the fund obtains consent from at least 75% of its investors (by value) to hold funds against anticipated liabilities. Third, if the funds are required to cover residual winding-up operational expenses.

To ensure transparency, fund managers must disclose the exact amount to be retained and the estimated duration when seeking investor approval. For those retaining funds solely for operational expenses, SEBI has capped the retention period at a maximum of three years from the end of the fund's permissible life.

Introduction of the 'Inoperative Fund' Status

To streamline the lifecycle of funds that have completed their investment activities but remain registered due to legal or administrative reasons, SEBI has introduced the 'Inoperative Fund' framework. This status is designed for AIFs that have liquidated all investments but continue to hold retained proceeds or are awaiting the outcome of litigation.

An AIF seeking to surrender its registration while still holding retained money may apply for this 'Inoperative Fund' status. To prevent misuse, these funds face strict prohibitions: they are barred from making new investments, launching new schemes, or charging any management fees. Any retained money must only be invested in instruments permitted under existing AIF Regulations.

Regulatory Compliance and Reporting Mandates

بينما يوفر الإطار الجديد المرونة، فإنه يحافظ على رقابة صارمة. منحت SEBI "الأموال غير العاملة" (Inoperative Funds) عدة إعفاءات لتقليل عبء الامتثال، بما في ذلك الإعفاء من تقديم تقارير النشاط الربع سنوية والسنوية، والإفصاح عن مقارنة الأداء، وبعض متطلبات التدقيق لمذكرات الطرح الخاص (PPM).

ومع ذلك، تظل المساءلة أولوية. فقد ألزمت SEBI كلاً من صناديق الاستثمار البديلة (AIFs) التي تحتفظ بالأموال وتلك المصنفة كـ "أموال غير عاملة" بتقديم تقرير سنوي يفصل الأموال المحتجزة والالتزامات القائمة. يجب تقديم هذا التقرير إلى كل من SEBI والمستثمرين في غضون 30 يومًا من نهاية كل سنة مالية. تدخل هذه اللوائح حيز التنفيذ فوراً، وتمتد أيضاً لتشمل صناديق رأس المال الاستثماري المسجلة بموجب لوائح عام 1996.

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