Alternative Investment Fund covers pooled investment resources that invest in hedge funds, private equity, venture capital, managed futures, etc. In other words, we can say that Alternate Investment Funds refers to an investment that is different from conventional investment possibility such as debt securities, stocks, etc. Alternative Investment Fund Registration is a recognition that assists every investor to take advantage of getting funds or investing.
What is Alternative Investment Fund Registration?
In India, Alternative Investment Funds (AIFs) can be established in the form of a Company, Limited Liability Partnership (LLP) or as a Corporate Body to collect funds from Indian or Foreign investors as an investment according to the defined investment strategy to return benefits to investors in the form of investment or return. Alternative Investment Funds (AIFs) include Private equity funds, debt funds, venture capital, etc.
Alternative Investment Fund encompasses pooled investment resources that invest in hedge funds, private equity, venture capital, managed futures, etc. In other words, we can say that Alternate Investment Funds refers to an investment that is different from conventional investment possibility such as debt securities, stocks, etc. Alternative Investment Fund Registration is a recognition that assists every investor to take advantage of getting funds or investing.
Various Categories of Alternative Investment Fund Registration
Following are the AIF registration categories under which an entity can apply:
Category- I of Alternative Investment Fund Registration
The AIF category invests in early-stage ventures, start-ups, infrastructure funds, Small and Medium Enterprises (SMEs), social ventures, etc. These Alternative Investment Funds are beneficial in improving the overall economy of India; thus, these AIFs receive incentives from the Security Exchange Board of India (SEBI) and the Government of India.
Category- II of Alternative Investment Fund Registration
These AIFs are not allowed to borrow for any reason other than to perform day to day transactions. These AIFs invest in any form of combination and include debt funds, equity funds, real estate private equity funds, etc.
Category- III of Alternative Investment Fund Registration
Under this category of Alternative Investment Fund registration, short-term investments are conducted, and later these investments are sold as hedge funds to make short-term profits. Various PIPE funds, hedge funds, etc. come under this category of Alternative Investment Fund.
What is the Process of Alternative Investment Fund Registration?
Following are the steps an entity has to follow to complete the registration process of Alternate Investment Fund:
Apply to SEBI
The applicant has to apply in form A of SEBI under Alternative Investment Fund Regulations of 2012 along with the required documents attached such as:
Details of registered office address
Name and contact details of the applicant. Contact details such as mobile number, E-Mail address, residential address.
Registration certificate of the company
If the applicant is a registered Limited Liability Partnership (LLP), it must submit the Partnership Deed.
If the applicant is a Trust, it must submit the Trust Deed.
Investment plans and Business Strategies
A draft copy of the placement memorandum
Authorization Letter
The applicant has to submit an authorization letter in case the applicant entity has authorized any promoter, director, or any other officer to act as an authorized signatory.
Security Exchange Board of India (SEBI) Compliances
To identify that an applicant is ineligible or eligible for registration under the Alternative Investment Fund must study the guidelines of the Security Exchange Board of India (SEBI) thoroughly.
Cover Letter
In case if the applicant entity is registered with the Security Exchange Board of India (SEBI) as a venture capital fund, the applicant entity must provide details about the same in the cover letter. In addition to this, the applicant entity has to state in covering letter that whether it has been conducting any activity as an Alternative Investment Fund (AIF) or it is applying for a new fund.
Final Submission of Registration Application
The applicant has to fill the online application according to the SEBI guidelines. The applicant t also has to provide a properly filled, duly signed, stamped, and numbered Form A, which will be accompanied by the necessary required documents and application fee of INR 1 lakh by way of a draft drawn in the name of SEBI, which will be payable at Mumbai and it must be submitted for the issuance of the registration certificate.
Scrutinizing the Registration Application
The Security Exchange Board of India (SEBI), within twenty-one days of acceptance of the registration application, will verify the registration application, and a reply for the same will be sent to the applicant. The registration application is examined for its correctness by the Security Exchange Board of India (SEBI), and if the SEBI is satisfied with the application and submitted documents will approve the registration application.
Grant of Registration Certificate
On receiving the approval from the Security Exchange Board of India (SEBI), the applicant has to submit the registration fee for the issuance of registration certificate:
If the applicant entity falls under the category- I of AIF registration, then the prescribed fee is INR 5 lakh.
If the applicant entity falls under the category – II of AIF registration, then the prescribed fee is INR 1 lakh.
If the applicant entity falls under the category- III of AIF registration, then the prescribed fee is INR 15 lakh.
The AIF registration certificate is valid for the lifetime of the AIF entity.
Ineligibility for Alternate Investment Fund Registration
According to the prescribed guidelines of the Security Exchange Board of India (SEBI), the following entities are not qualified for AIF (Alternative Investment Fund Registration):
Trustor Gratuity has registered whose primary objectives are beneficial for the employees only.
A family trust that has been registered with the main objective of providing benefits to its relatives.
An Employee Stock Ownership Plan trust which is registered under the Security Exchange Board of India (SEBI).
Any other entities which are not instituted as fund managers.
Conclusion
In India, Alternative Investment Funds (AIFs) are established in the form of a Company, Limited Liability Partnership (LLP) or as a Corporate Body to collect funds from sophisticated Indian or Foreign investors as an investment according to the defined investment strategy to return benefits to investors in the form of investment or return. Alternative Investment Funds (AIFs) include Private equity funds, debt funds, venture capital, etc.