The Securities and Exchange Board of India ( SEBI ), vide notification no. SEBI/LAD-NRO/GN/2024/209 dated 18th November 2024 has introduced amendments to the regulations governing Alternative Investment Funds (AIFs) through the Securities and Exchange Board of India (Alternative Investment Funds) (Fifth Amendment) Regulations, 2024.
Under the revised regulations, a new sub-regulation (20) has been added to Regulation 20, ensuring that investors in AIF schemes have rights proportional to their commitment in each investment and the distribution of its proceeds. This pro-rata allocation rule applies unless otherwise specified by SEBI.
However, for AIF schemes issued before the implementation of these amendments, where rights are not pro-rata and are not exempted by SEBI, specific guidelines will govern the treatment of such rights.
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Additionally, the new provisions mandate that all other investor rights in AIF schemes, not covered under the pro-rata clause, should be pari passu (equal in all respects). However, SEBI has allowed for differential rights for select investors, provided these do not adversely affect other investors in the scheme.
Exemptions to this requirement are granted for Large Value Funds targeting Accredited Investors. Furthermore, any differential rights issued before these amendments, which do not conform to the current provisions, will be addressed as per SEBI’s specified guidelines.
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Further in the SEBI (Alternative Investment Funds) Regulations, 2012,— I. In regulation 19B, in sub-regulation (2), after the words “sub-regulation (2) of regulation 16,” and before the words “and the guidelines and circulars”, the words “sub-regulation (21) of regulation 20” shall be inserted.
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