Alternative Investment Fund Registration is a certification that facilitates every investor to benefit from getting funds or investing. Alternate Investment Fund is defined under Regulation 2 (1) (b) of the Securities Exchange Board of India (SEBI) Regulations, 2012 for Alternative Investment Fund.
Overview of Alternative Investment Fund Registration
Alternative Investment Funds are established in India in the form of Limited Liability Partnership (LLP), Trust, Company or as a Corporate Body to collect funds from sophisticated Indian and Foreign investors as an investment as per the defined investment policy to return profits to the investors in the form of return on investment. Alternative Investment Funds (AIFs) do not include funds covered under the Security Exchange Board of India (SEBI) Mutual Funds Regulations, 1996. Alternative Investment Funds include Private Equity Funds, Venture Capital, Debts Funds, Etc.
Alternative Investment Funds are privately pooled investment establishment. In other words, Alternative Investment Funds collect funds from investors and then invest these collected funds and provide a return on investment to the investors. AIFs are somewhat related to stocks or bonds; they are less volatile and provide an excellent return.
Different Categories of Alternative Investment Fund Registration
Following are the different types of categories under which an individual or an organization can apply for Alternative Investment Fund Registration in India:
Category- I of Alternative Investment Fund Registration
These kinds of Alternative Investment Funds primarily invest in early-stage ventures, start-ups, social ventures, small and medium enterprises, infrastructure funds, etc. The category- I Alternative Investment Funds- is beneficial in improving the overall Indian Economy; therefore, AIFs get incentives by the Government of India and the Security Exchange Board of India (SEBI).
Category- II of Alternative Investment Fund Registration
These funds are not authorized to borrow for any purpose other than to carry day to day transactions. These Alternative Investment Funds invest in any form of combination and include real estate private equity funds, debt funds, private equity funds, etc.
Category- III of Alternative Investment Fund Registration
Under these AIFs, the investment made is for a short period of time, and later they are sold as hedge funds to make short term profit. An assortment of hedge funds, Private Investment in Public Equity (PIPE) Funds, etc. from this category of Alternative Investment Funds.
Documents and Legal Requirement for Alternative Investment Fund Registration
Charter documents like Memorandum of Association (MoA), Partnership Deed, or a Trust Deed must-have clauses concerning carrying on the activities as an Alternative Investment Fund (AIF).
In the case of a partnership firm or a trust, the respective partnership deed and trust deed must be registered with the concerned registrars as per the applicable laws.
The charter documents must enclose the provisions barring invitation to the public to subscribe to its securities.
The applicant, manager, and sponsor must be proper and fit according to Schedule II's provisions of the Securities Exchange Board of India (SEBI) intermediaries Regulations of 2008.
The members of the vital investment group of the investment manager of the Alternative Investment Fund (AIF) must acquire sufficiently and must involve at least one key individual having a minimum of 5 years of significant experience.
The sponsor and Manager of an Alternative Investment Fund must acquire the required workforce and infrastructure to exonerate its activities.
The applicant must clearly illustrate the investment strategy, the objective of investment, tenure, targeted investors, and proposed corpus of the fund.
An Alternative Investment Fund must have a minimum corpus fund of at least INR 20 crores. The minimum corpus for an Angel Fund is INR 5 crores.
In an Alternative Investment Fund, the minimum amount of investment conveyed by every investor must be INR 1 crore. On the other hand, for an Angel Fund, an investor's minimum investment is INR 25 lakh or more.
The minimum investment by a director or by an employee of an Alternative Investment Fund must be INR 25 lakh or more.
It is not compulsory for an employee of the manager who is contributing to the profits to make any investments in the Alternative Investment Funds.
An Alternative Investment Fund scheme cannot have more than a thousand investors, whereas an Angel Fund cannot exceed Two Hundred investors' limit.
Category I and II of Alternative Investment Fund are close-ended funds, whereas, in Alternative Investment Funds Category III, the funds are open-ended.
The minimum tenure for category I and II of the Alternative Investment Fund is three years, whereas, for Angel Funds, the maximum term is five years. However, there is a provision for extending the tenure of an Alternative Investment Fund, which requires the unitholders' authorization consisting of at least 2/3rd in corpus value.
Alternative Investment Fund Regulations restrict the collection or solicitation of category III Alternative Investment Fund, except by way of the private placement as per the provisions of the Companies Act of 2013. There is no specific prescribed provision for the same in Alternative Investment Fund Regulations.
Units of an Alternative Investment Fund might be listed stock exchange only after closure of the scheme or fund, subject to minimum tradable lots of INR 1 crore.
Ineligibility for Alternate Investment Fund Registration
As per the guidelines of the Security Exchange Board of India (SEBI), the following entities are not eligible for Alternative Investment Fund Registration:
· Trustor Gratuity registered that has principal objectives which are beneficial for the employees.
· Any family trust is registered with the main aim of offering benefits to relatives.
· Employee Stock Ownership Plan trust registered under the Security Exchange Board of India (SEBI).
· Any other entities not established as fund managers.
Process for Alternative Investment Fund Registration
Conclusion
Alternative Investment Funds are privately pooled investment establishment. In other words, Alternative Investment Funds collect funds from investors and then invest these collected funds and provide a return on investment to the investors. AIFs are somewhat related to stocks or bonds; they are less volatile and deliver a significant return.