The Securities and Exchange Board of India (SEBI) on April 10, 2023, issued the Guidelines with respect to excusing or excluding an investor from an investment of AIF.
The following has been stated namely: -
• It was observed that there was an inconsistency and lack of adequate disclosure with respect to certain industry practices
• It has been decided that an AIF may excuse its investor from participating in a particular investment in the following circumstances namely: -
1. If the investor, confirms that its participation in the investment opportunity would be in violation of applicable law or regulation.
2. If the investor, as part of the contribution agreement or any other agreement signed with the AIF, had disclosed to the manager that, participation of the investor in such investment opportunity would be in contravention to the internal policy of the investor.
3. If the manager of the AIF is satisfied that the participation of such an investor in the investment opportunity would lead to the scheme of the AIF being in violation of applicable law or regulation or would result in material adverse effects on the scheme of the AIF. The manager shall record the rationale for such exclusion, along with the documents relied upon.
4. If the investor of an AIF is also an AIF or any other investment vehicle, such investor may be partially excused or excluded from participation in an investment opportunity to the extent of the contribution of the said fund/investment vehicle’s underlying investors who are to be excused or excluded from such investment opportunity. The manager of AIF shall record the rationale for such excuse or exclusion along with the supporting documents, if any.
This has come into force on April 10, 2023
[Notification No. SEBI/HO/AFD-1/PoD/P/CIR/2023/053]
