NOTE ON REGISTRATION AS AN ALTERNATE INVESTMENT FUND (“AIF”) UNDER THE SEBI (ALTERNATE INVESTMENT FUND) REGULATION, 2012.

1. INTRODUCTION

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1. WHAT IS AN ALTERNATE INVESTMENT FUND (“AIF”)?

Alternative Investment Fund or AIF means any fund established or incorporated in India which is a privately pooled investment vehicle which collects funds from sophisticated investors, whether Indian or foreign, for investing it in accordance with a defined investment policy for the benefit of its investors.

 

AIF does not include funds covered under the SEBI (Mutual Funds) Regulations, 1996, SEBI (Collective Investment Schemes) Regulations, 1999 or any other regulations of the Board to regulate fund management activities. Further, certain exemptions from registration are provided under the AIF Regulations to family trusts set up for the benefit of ‘relatives’ as defined under Companies Act, 2013, employee welfare trusts or gratuity trusts set up for the benefit of employees, “holding companies” within the meaning of Companies Act, 2013 etc. [Ref. Regulation 2(1)(b)]

 

 

2. IN WHAT CATEGORIES CAN AN APPLICANT SEEK REGISTRATION AS AN AIF?

Applicants can seek registration as an AIF in one of the following categories, and in sub-categories thereof, as may be applicable: [Ref. Regulation 3(4)]

 

• Category I AIF:

1. Venture Capital Funds
2. Angel Funds
3. SME Funds
4. Social Venture Capital Funds
5. Infrastructure funds

• Category II AIF

1. Private Equity (PE) Funds
2. Real estate Funds
3. Funds for distressed assets
4. Debt Funds
5. Funds of Funds

• Category III AIF

1. Hedge Funds
2. Private Investment in Public Equity Funds

 

3. WHAT IS CATEGORY I AIF?

AIFs which invest in start-up or early-stage ventures or social ventures or SMEs or infrastructure or other sectors or areas which the government or regulators consider as socially or economically desirable and shall include venture capital funds, SME Funds, social venture funds, infrastructure funds and such other Alternative Investment Funds as may be specified. [Ref. Regulation 3(4) (a)]

 

4. WHAT IS CATEGORY II AIF?

AIFs which do not fall in Category I and III and which do not undertake leverage or borrowing other than to meet day-to-day operational requirements and as permitted in the SEBI (Alternative Investment Funds) Regulations, 2012. [Ref. Regulation 3(4) (b)]

Various types of funds such as real estate funds, private equity funds (PE funds), funds for distressed assets, etc. are registered as Category II AIFs.

 

5. WHAT IS CATEGORY III AIF?

AIFs which employ diverse or complex trading strategies and may employ leverage including through investment in listed or unlisted derivatives. [Ref. Regulation 3(4) (c)]

Various types of funds such as hedge funds, PIPE Funds, etc. are registered as Category III AIFs.

 

1. ELIGIBILITY CRITERIA FOR AIF’s REGISTRATION:

 

For the purpose of the grant of certificate to an applicant, the Board shall consider the following conditions for eligibility, namely, —

 

1. The MOA in case of a Company; or the Trust Deed in case of a Trust; or the Partnership deed in case of a limited liability partnership permits it to carry on the activity of an Alternative Investment Fund;

 

1. The applicant is prohibited by its MoA and AoA or Trust Deed or Partnership deed from making an invitation to the public to subscribe to its securities;

 

1. In case the applicant is a Trust, the instrument of trust is in the form of a deed and has been duly registered under the provisions of the Registration Act, 1908;

 

1. In case the applicant is a LLP, the partnership is duly incorporated and the partnership deed has been duly filed with the Registrar under the provisions of the Limited Liability Partnership Act, 2008;

 

1. In case the applicant is a body corporate, it is set up or established under the laws of the Central or State Legislature and is permitted to carry on the activities of an Alternative Investment Fund;

 

1. The applicant, Sponsor and Manager are fit and proper persons based on the criteria specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008;

 

1. The key investment team of the Manager of Alternative Investment Fund has –

• adequate experience, with at least one key personnel having not less than five years of experience in advising or managing pools of capital or in fund or asset or wealth or portfolio management or in the business of buying, selling and dealing of securities or other financial assets; and

 

• at least one key personnel with professional qualification in finance, accountancy, business management, commerce, economics, capital market or banking from a university or an institution recognized by the Central Government or any State Government or a foreign university, or a CFA charter from the CFA institute or any other qualification as may be specified by the Board:

 

• At least one key personnel, amongst the associated persons functioning in the key investment team of the Manager of an Alternative Investment Fund, shall hold the NISM Series-XIX-C: Alternative Investment Fund Managers Certification.

 

[Provided that the requirements of experience and professional qualification as specified in regulation 4(g) (i) and 4(g) (ii) may also be fulfilled by the same key personnel.]

 

1. the Manager or Sponsor has the necessary infrastructure and manpower to effectively discharge its activities;

 

1. the applicant has clearly described at the time of registration the investment objective, the targeted investors, proposed corpus, investment style or strategy and proposed tenure of the fund or scheme;

 

1. Whether the applicant or any entity established by the Sponsor or Manager has earlier been refused registration by the Board.

 

1. TAXATION ASPECT IN THE HANDS OF AIF

 

The Finance Act, extended tax pass through status to AIFs that are registered with SEBI as Category I, AIFs or Category II AIFs under the AIF Regulations.

 

• They are governed by a special tax regime as provided under Section 115UB of the Income tax Act, 1961 (the Act)
• Any income (other than business income) earned by a SEBI registered Category I and II AIF, is exempt from tax in the hands of the AIF under Section 10(23FBA) of the Act. Such income shall be taxable directly in the hands of the investors of the AIF under Section 115UB of the Act.
• Any income distributed by investment fund is not liable for DDT u/s 115-0
• Any income distributed by investment fund (except business income), TDS of 10% has to be deducted by any fund u/s 194 LBB.

 

The investors shall be chargeable to tax in the same manner as if it were the income accruing or arising to, or received by, such investor had the investments, made by the AIF, been made directly by such investor. Income taxable in investors’ hands shall be deemed to be of the same nature and proportion as in the hands of the AIF.

 

• Further, in terms of Section 115UB (2) of the Act, in case there is a loss at the fund level (i.e. current loss or loss which remained to be set off), such loss shall not be allowed to be passed through to the investors but would be carried forward at AIF level to be set off against income of future years in accordance with the provisions of Chapter VI of the Act.

 

• Investment fund compulsorily required to file return u/s 139(4F).

 

Category III AIFs has not yet been accorded a Pass-through status, which means that income from such funds will be taxed at the investment fund level and the tax obligation will not pass through to unit holders. Income under the head, “Profits or gains from business or profession”, the fund would be taxed in respect to such income at marginal rate of tax.

 

1. PLACE OF RENDERING SERVICES:

 

The place of rendering services generally shall be our office situated at Off No. 106, Sr. No. 55, Sukhniwas, Mangalwar Peth, Pune-411011

 

1. FEES:

Government Charges for the assignment shall be are as follows

Sr. No	Particulars	Amount in INR (For category I)	Amount in INR (For category II)	Amount in INR (For category III)
1.	Application fees	1,00,000/- (Indian Rupees One Lakh Only)	1,00,000/- (Indian Rupees One Lakh Only)	1,00,000/- (Indian Rupees One Lakh Only)
2.	Registration fee for Alternative Investment Funds	5,00,000/- (Indian Rupees Five Lakh Only)	10,00,000/- (Indian Rupees Ten Lakh Only)	15,00,000/- (Indian Rupees Fifteen Lakh Only)

 

 

Professional fees for the assignment will be are as follows:

Sr. No.	Particulars	Amount (In INR)
1.	Professional fees for Registration of Alternative Investment Funds	Will be discussed in a meeting.

*Government fees and Out of Pocket expenses at Actuals

GST shall be applicable @18%.

 

1. TERMS AND CONDITIONS:

 

• Assigner shall nominate specific person(s) for co-ordination and shall provide relevant data support in concern assignment Mr. Pramodkumar Ladda be assigned person.
• Government fees like e-payment, application fees / registration fees & Penalty shall be paid by assigner.
• All the payments should be made in the name of “Ladda Bhutada& Associates”.
• All the disputes shall be subject to Pune Jurisdiction.
• Termination of this contract requires 30 days’ notice.
• Payment Terms- 40% advance along with Work Order, 40% after submission of online Application and balance 20% after securing the Registration.
• GST- Extra as Applicable

 

We hope the above is in line with your requirements. Hoping for favourable response from your end.

 

Thanking you and assuring the best of our services at all times.

 

Yours truly,

 

 

SD/-

CS IP PRAMODKUMAR R. LADDA

Company Secretary and Insolvency Professional