Introduction of Special Situation Funds as a sub-category under Category I AIFs
Summary
SEBI has introduced Special Situation Funds (SSF) as a sub-category under Category I Alternative Investment Funds to invest in special situation assets. The regulations specify minimum corpus requirements, varying minimum investment thresholds for different investor classes, and compliance with the Insolvency and Bankruptcy Code. Additionally, SSFs acquiring stressed loans must adhere to specific RBI Master Direction provisions regarding eligibility, lock-in periods, and due diligence.
Text
SEBI (Alternative Investment Funds) Regulations, 2012 have been amended to introduce Special Situation Funds (SSF), a sub-category under Category I AIF, which shall invest in ‘special situation assets’.
Each scheme of SSF shall have a corpus of at least one hundred crore rupees.
SSF shall accept an investment of value not less than ten crore rupees from an investor. In case of an accredited investor, the minimum is five crore rupees. For employees or directors of the SSF or its manager, the minimum is twenty-five lakh rupees.
SSF intending to act as a resolution applicant under the Insolvency and Bankruptcy Code, 2016 shall ensure compliance with the eligibility requirement provided thereunder.
SSF may acquire stressed loan in terms of clause 58 of RBI Master Direction upon inclusion of SSF in the respective Annex of the RBI Master Direction.
Stressed loan acquired by SSF in terms of clause 58 of the RBI Master Direction shall be subject to a minimum lock-in period of six months. The lock in period shall not be applicable in case of recovery of the stressed loan from the borrower.
SSF acquiring stressed loans in terms of the RBI Master Direction shall comply with the same initial and continuous due diligence requirements for its investors, as those mandated by Reserve Bank of India for investors in Asset Reconstruction Companies.
This circular shall come into force with immediate effect.
This circular is issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
Source: SecMarx — Introduction of Special Situation Funds as a sub-category under Category I AIFs. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.