SEBI proposes relaxed rules for illiquid AIF investments

Illiquid AIF investments: The Securities and Exchange Board of India (SEBI) unveiled a proposed framework aimed at easing regulations for alternative investment funds (AIFs) and venture capital funds (VCFs) dealing with unliquidated investments post the fund tenure's expiration.

As per a discussion paper published on the regulator's website, SEBI suggests an alternative approach to handling unliquidated investments. Instead of introducing a new scheme for liquidation, the proposal advocates for extending the tenure of the fund. Presently, VCFs are required to liquidate their investments within three months of the fund expiration, while AIFs are granted a 12-month window.

In a move to provide flexibility, SEBI proposes that VCFs transition to the AIF regime to benefit from the extended window for liquidating their investments. The market has been invited to share comments on these proposed changes until February 2, following which SEBI will finalize the rules.

These proposed adjustments stem from representations made by the funds industry to SEBI, highlighting existing tax issues and the cumbersome nature of the current process. The regulator aims to address these concerns and streamline the process. Input from the market will play a crucial role in shaping the final regulations.

(With Reuters inputs)