Register for an Alternative Investment Fund: Step-by-Step Guide

AIFs or Alternative Investment Funds are investment vehicles that pool resources or fund from private high net worth individuals. The funds are then invested in PE funds, VCs, Angel Funds, and others to create profit for their investors. AIFs can be registered with the SEBI as an LLP, trust, company, etc.These are fast becoming a lucrative investment option for high rollers, domestic and foreign, in India. The investment in AIF was recorded to be Rs 1.1 trillion in the last financial quarter of FY 18-19.Let’s see how to register an AIF.

To get an Alternative Investment Fund registered under SEBI is a fairly straightforward process. Here is how you can do it:

• If the applicant is already registered with the SEBI as a VC fund.
• If the applicant is already involved in activities as is undertaken by an AIF before submission of the application.
• If the applicant is applying for a new AIF registration.

• Completely and correctly filled Form A duly signed and stamped.
• A bank draft of Rs 1 Lakh drawn in the name of SEBI as application fees. The draft must be payable at Mumbai.

1. Submit your application to SEBI along with a duly filled Form A and all the necessary documents. The form is available within the SEBI Regulations, 2012 for AIFs.
2. Once the application is received at SEBI, the applicant will be sent a reply, of acceptance or rejection, within 21 days from the Board.
3. The applicant must thoroughly go through all the criteria listed under SEBI regulations. This will help in speeding up the registration process by avoiding any unnecessary glitch or delay.
4. A covering letter is to be sent to SEBI by the applicant clearly outlining the following:
5. The applicant must submit the following to complete the registration process:
6. An online application must also be filled by the applicant as notified by SEBI under its application guidelines from time to time.

• A registration fee of Rs. 5 Lakhs drawn in favour of SEBI via a bank draft payable at Mumbai. This fee is applicable only if the applicant is not registered with SEBI as a VC fund.
• If the applicant is already registered with SEBI as a VC fund, then a fee of Rs. 1 Lakh must be paid towards registration.

1. After being completely satisfied that the applicant meets and fulfils all the requirements as listed under Regulations, SEBI will inform the applicant about the success of the application.
2. Once the applicant receives approval from the SEBI, it shall submit the following:
3. After the payment of the registration fee, SEBI will grant the applicant a registration certificate for the AIF.

1. After the AIF is registered with SEBI, it must always comply with requirements laid down by the SEBI.
2. If there is any change in the information provided by the AIF during the registration process, it must immediately inform the SEBI about the same.
3. Each AIF is mandated to appoint a Custodian for protecting the securities in case the corpus surpasses Rs. 500 Cr. mark. The custodian is to be registered with SEBI.
4. A qualified auditor must annually audit the AIF’s account books.
5. Sponsors/Managers of the AIFs are required to act in a fiduciary capacity towards all the investors. They must disclose any and every conflict of interest if and when they arise.
6. The AIF must lookout for any updates/new circulars/guidelines released by SEBI.

To get registered as an AIF, the entity must fulfil the following criteria:

1. The general public must be restricted through MOA & AOA from buying shares of the entity. The AIF must raise investments by way of private collection only.
2. At any point in time, the maximum number of investors in the entity must not go beyond 1000.
3. For every scheme listed under an AIF, there should be a minimum corpus of Rs. 20 Cr.
4. No investor shall make an investment of less than Rs. 1 Cr. However, if the investor is an employee, manager, director of the AIF s/he can make a minimum investment of Rs. 25 lakhs.
5. The manager/sponsor of the AIF must have a continuing interest of minimum 2.5% or Rs. 5 Cr., whichever is lower, in the AIF as part of the investment. In the case of a Category III AIF, this value should not be lower than 5% or Rs. 10 Cr. (whichever is lower).
6. It is imperative for the manager/sponsor to disclose their AIF investment to the investors of the AIF.
7. When it comes to investment, Category I and II AIFs are restricted to invest only 25% of their entire fund in one company. A Category III AIF can only invest 10% of its corpus with one company.
8. If the applicant is already registered as a trust, it must provide a trust deed registered under Registration Act 1908.
9. A partnership deed registered under LLP Act 2008 must be provided if the applicant is an LLP.
10. Investors must be an NRI or Indian.

Furthermore, the following entities cannot apply for a registration certificate as an AIF:

1. ESOP trust registered with SEBI.
2. A family trust formed with the main objective of providing benefits to family members.
3. Other entities that are not fund managers.

If an investor is having any complaint or grievances with the workings of the AIF, s/he can raise the same with SEBI. The board has established an online grievance redressal system known as SEBI Complaint Redressal System or SCORES for the specific purpose. AIF must resolve any such issues through its sponsors or managers via arbitration or a mutually decided mechanism.

Having an AIF registered is important and necessary for any applicant who is planning to start a VC, angel funding business, etc. Getting your AIF registered with SEBI is an easy and quick process. Thus, ensure that you meet all the eligibility criteria as listed and have all the necessary documents in place.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.