Modalities for launching Liquidation Scheme and for distributing the investments of Alternative Investment Funds (AIFs) in specie
Summary
This circular amends the SEBI (Alternative Investment Funds) Regulations, 2012 to provide flexibility for AIFs to handle unliquidated investments during winding up. It establishes modalities for launching a 'Liquidation Scheme' or distributing investments in-specie to investors. The document outlines specific procedural requirements, valuation standards, and reporting obligations for these exit mechanisms.
Text
“‘liquidation period’ means a period of one year following the expiry of tenure or extended tenure of the scheme for fully liquidating the scheme of an Alternative Investment Fund.”
“‘Liquidation scheme’ means a close ended scheme launched by an Alternative Investment Fund only for the purpose of liquidating the unliquidated investments purchased from its scheme, whose tenure has expired.”
during liquidation period of a scheme, an Alternative Investment Fund may distribute investments of a scheme which are not sold due to lack of liquidity, in-specie to the investors or sell such investments to a liquidation scheme, after obtaining approval of at least seventy five percent of the investors by value of their investment in the scheme of the Alternative Investment Fund...
During the Liquidation Period of a scheme of an AIF (‘Original Scheme’), if the AIF decides to launch Liquidation Scheme, the AIF shall obtain consent of 75% of investors by value of their investment in the Original Scheme.
The scheme launched by the AIF for this purpose shall contain the words ‘Liquidation Scheme’ in its name.
Upon obtaining the requisite investor consent for launching Liquidation Scheme, the AIF shall arrange bid for a minimum of 25% of the value of the unliquidated investments.
The AIF shall disclose the bid value, along with the valuation of the unliquidated investments carried out by two independent valuers, to all the investors of the Original Scheme.
The dissenting investors of the Original Scheme who did not consent to sell the unliquidated investments to the Liquidation Scheme, shall be offered an option to fully exit the Original Scheme out of the 25% bid arranged by the AIF/ manager.
If the bidder or its related parties are investors in the Original Scheme, they shall not be provided exit from the Original Scheme out of the bid.
For capturing in the track record of the manager and for reporting to Performance Benchmarking Agencies, the value of such sale shall be – a. Bid value, if the AIF/ manager arranges bid for a minimum of 25%... b. One Rupee, if the AIF/ manager fails to arrange bid...
The Liquidation Scheme shall be launched and Original Scheme shall be wound up, prior to the expiry of the Liquidation Period of the Original Scheme.
Accordingly, the tenure of the Liquidation Scheme shall be calculated from the date of filing of PPM with SEBI and such tenure shall not be more than the tenure of the Original Scheme excluding any permissible extension.
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Source: SecMarx — Modalities for launching Liquidation Scheme and for distributing the investments of Alternative Investment Funds (AIFs) in specie. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.