The Securities and Exchange Board of India (SEBI) has released the Securities and Exchange Board of India (Alternative Investment Funds) (Fifth Amendment) Regulations, 2024, with an aim to enhance the regulatory framework governing Alternative Investment Funds (AIFs).
Key Highlights of the Amendment:
1) Insertion in Regulation 19B
In Regulation 19B, sub-regulation (2) now includes a reference to “sub-regulation (21) of regulation 20,” reinforcing the interconnected nature of these provisions and aligning with updates introduced in Regulation 20.
2) In regulation 20, after sub-regulation 20, the following sub-regulations shall be inserted namely:
i. Sub-Regulation (21): Pro-rata Rights for Investors
a) Investors of an AIF scheme now hold rights, proportional to their commitment to the scheme, in both the investments and the distribution of proceeds unless otherwise specified by SEBI.
b) Implication for Existing Schemes: For schemes issued prior to this amendment, non-pro-rata rights that are not exempted by SEBI will be addressed as per further guidelines from the Board.
ii. Sub-Regulation (22): Pari-Passu Rights
This sub-regulation mandates that the rights of investors in an AIF scheme, apart from those covered under sub-regulation (21), must be equal (pari-passu) in all respects.
a) Differential Rights: Select investors may be offered differential rights without other investors, subject to SEBI’s specifications.
b) Exemptions: The requirement for pari-passu rights does not apply to Large Value Funds for Accredited Investors.
c) Existing Differential Rights: Any differential rights issued before the amendment, not falling within the first proviso of sub-regulation (22), will be addressed in accordance with SEBI’s guidelines.
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