Eligibility Criteria for AIF Registration in India

Alternative Investment Funds (AIFs) have emerged as a powerful investment vehicle in India, catering to high-net-worth individuals and institutional investors. To ensure transparency and investor protection, the Securities and Exchange Board of India (SEBI) has laid down specific eligibility criteria for AIF registration. In this article, we explore the detailed requirements you need to fulfill for AIF Registration in India.

What is an Alternative Investment Fund (AIF)?

Alternative Investment Fund (AIF) refers to any fund established in India as a trust, company, limited liability partnership (LLP), or a body corporate that privately pools funds from investors for investing it in accordance with a defined investment policy.

AIFs are broadly classified into three categories:

• Category I: Start-ups, SMEs, social ventures, infrastructure

• Category II: Private equity funds, debt funds

• Category III: Hedge funds, strategy-based funds

Importance of AIF Registration

SEBI mandates AIF Registration to:

• Safeguard investor interests

• Ensure proper governance and disclosures

• Encourage responsible fund management

• Foster transparency in alternative investment structures

Eligibility Criteria for AIF Registration in India

To register an AIF under SEBI regulations, the following eligibility conditions must be satisfied:

1. Legal Structure

The applicant must be established as one of the following entities:

• Trust under the Indian Trusts Act, 1882

• Limited Liability Partnership (LLP) under the LLP Act, 2008

• Company under the Companies Act, 2013

• Body Corporate permitted under the law to act as an AIF

2. Fit and Proper Person Criteria

The applicant and its key personnel (promoters/directors/partners) must:

• Be fit and proper persons as defined by SEBI

• Have a clean track record in financial dealings

• Not have been involved in any fraudulent or unethical practices

3. Investment Strategy and Policy

• The fund must have a clear investment objective and policy.

• It must disclose details of targeted investments, risk management, and asset allocation strategy.

4. Minimum Corpus Requirement

Each scheme of the AIF must have a minimum corpus of INR 20 crore (INR 10 crore for Angel Funds).

5. Minimum Investment by Investors

• Each investor (other than employees or directors of the AIF) must invest at least INR 1 crore.

• Employees/directors of the AIF or the fund manager may invest a minimum of INR 25 lakh.

6. Sponsor/Manager Contribution

• The sponsor or manager of the AIF must have a continuing interest of:

  • 2.5% of the corpus or INR 5 crore, whichever is lower (for Category I and II)

  • 5% of the corpus or INR 10 crore, whichever is lower (for Category III)

7. Manager's Experience and Infrastructure

• The AIF must have a manager with adequate experience in fund management or advisory services.

• The manager must have a well-established infrastructure including qualified personnel, office space, and compliance mechanisms.

Documents Required for AIF Registration

• Certificate of Incorporation

• Partnership Deed / Trust Deed / Memorandum & Articles of Association

• Details of Sponsors, Trustees, and Fund Managers

• Investment Strategy and Policy Document

• Audited Financials of the Manager/Sponsor

• Fit & Proper declarations

Conclusion

Registering an AIF in India involves a comprehensive evaluation of legal structure, managerial capabilities, investment policies, and financial commitments. Meeting the above eligibility criteria is essential for obtaining AIF Registration under SEBI. For a seamless process, it's advisable to consult experienced professionals or legal advisors who specialize in AIF regulations.