SEBI Extends Deadline for Holding AIFs’ Investments in Dematerialised Form, Circular Out [Read Circular]
According to the modified guidelines, any investment made by an AIF on or after July 1, 2025, must be held in dematerialised form, regardless of whether the investment is made directly in an investee company or acquired from another entity
SEBI latest Circular – SEBI circular on AIF investments – taxscan
SEBI latest Circular – SEBI circular on AIF investments – taxscan
The Securities and Exchange Board of India ( SEBI ) has extended the deadline for Alternative Investment Funds ( AIFs ) to hold their investments in dematerialised form.
The extension was notified through a circular issued under the SEBI (Alternative Investment Funds) Regulations, 2012, which was last amended on January 5, 2024.
Initially, the requirement for AIFs to hold investments in dematerialised form was set by SEBI’s circular dated January 12, 2024, which was later incorporated into Chapter 21 of the Master Circular for AIFs on May 7, 2024. However, in a move to ease compliance, SEBI has now relaxed the prescribed timelines.
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The SEBI has decided to relax the aforesaid timelines, and accordingly relevant provisions of Para 21 of the Master Circular stand modified as under:
21.1. Any investment made by an AIF on or after July 01, 2025 shall be held in dematerialised form only, irrespective of whether the investment is made directly in the investee company or is acquired from another entity.
21.2. The investments made by an AIF prior to July 01, 2025 are exempted from the requirement of being held in dematerialised form, except in the following cases:
21.2.1. Investee company of the AIF has been mandated under applicable law to facilitate dematerialisation of its securities;
21.2.2. The AIF, on its own, or along with other SEBI registered intermediaries/entities which are mandated to hold their investments in dematerialised form, exercises control over the investee company.
For the purpose of the aforesaid clause, the definition of ‘control’ shall be construed with reference to Regulation 2(1)(f) of AIF Regulations.
21.3. The investments made by an AIF prior to July 01, 2025 which are covered under conditions as specified in Para 21.2.1 and Para 21.2.2 above, shall be held in dematerialised form by the AIF on or before October 31, 2025.
21.4. The aforesaid requirement of holding investments in dematerialised form shall not be applicable to:
21.4.1. Scheme of an AIF whose tenure (not including permissible extension
of tenure) ends on or before October 31, 2025;
21.4.2. Scheme of an AIF which is in extended tenure as on February 14, 2025.
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According to the modified guidelines, any investment made by an AIF on or after July 1, 2025, must be held in dematerialised form, regardless of whether the investment is made directly in an investee company or acquired from another entity.
Investments made prior to this date are exempt, except in specific cases where the investee company is legally required to facilitate dematerialisation, or where the AIF—either alone or with SEBI-registered entities—exercises control over the investee company as per AIF Regulations.
For investments falling under these exceptions, AIFs must ensure dematerialisation by October 31, 2025. However, the requirement will not apply to schemes with a tenure ending on or before October 31, 2025, or those already in an extended tenure as of February 14, 2025.
To Read the full text of the Circular CLICK HERE
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