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SEBI permits AIFs to retain liquidation proceeds beyond fund life

Business Standard  

The Securities and Exchange Board of India (Sebi) has issued new guidelines allowing Alternative Investment Funds (AIFs) to retain liquidation proceeds beyond their permissible fund life under specific conditions. Additionally, the regulator introduced an 'Inoperative Fund' framework designed to assist funds that have completed the liquidation of all investments but still hold residual proceeds or remain registered due to ongoing litigation. These measures aim to provide greater operational flexibility to AIFs during their winding-up process and the surrender of their registration.The new framework applies to AIFs and their schemes that have received litigation notices, tax demands, or regulatory communication indicating potential liabilities. Funds may also retain assets if they have obtained consent from at least 75 percent of their investors by value to cover anticipated liabilities, or if they must meet residual operational expenses related to the winding-up process. When retaining funds for operational expenses, the period of retention cannot exceed three years from the end of the original permissible fund life.