The International Financial Services Centres Authority (IFSCA) on January 09, 2025, issued a Consultation Paper on SPV Framework under IFSCA (Fund Management) Regulations, 2022.
The consultation paper issued , for promoting ease of doing business and to facilitate the growth of alternative investment industry in the IFSC, the creation of a Special Purpose Vehicle (‘SPV’) under the controlling scheme is being operationalized, to enable other investors to co-invest in the underlying securities along with the scheme or allow a scheme to take leverage at SPV level.
The following has been stated:
• SPV Structure
o An FME registered with IFSCA will be able to form an SPV having an existing Controlling Scheme in IFSC
o An SPV will have the same constitution as mentioned in Regulation 17 of the IFSCA (Fund Management) Regulations 2022, and thereof.
o A minimum of 50% of the equity share capital or interest or capital commitments to such SPV should be held by the controlling scheme. The controlling scheme has the same meaning as defined in Regulation 2(1)(h) of IFSCA (Fund Management) Regulations 2022, and thereof.
• Filing of Private Placement Memorandum (PPM)
All the requirements as mentioned in the IFSCA circular titled “Ease of doing business - Filing of Schemes or funds under IFSCA (Fund Management) Regulations 2022” dated 5 April 2024, except for the filing of a PPM, would be applicable. A Term Sheet, as mentioned in Annexure A, is to be filed within 21 working days from the date of making the investment.
• Nature, structure of Scheme and tenure of the Scheme
o The SPV can be open-ended or close ended as per the nature of the Controlling Scheme.
o The SPV term should be equal to the term of the Controlling Scheme. In case of winding-up of the Controlling Scheme, the SPV will also have to be wound up.
• Other Conditions
o No other shareholder, beneficiary, member or partner of the SPV shall exercise any rights that prevent the Controlling Scheme from complying with the regulatory requirements specified by IFSCA.
o The SPV level agreement should provide for an appropriate mechanism for resolution of disputes between the Controlling Scheme and the other shareholders, beneficiaries, members or partners.
o The provisions specified by IFSCA shall prevail in case of any inconsistencies between such agreement(s) and the obligations cast upon a Controlling Scheme by IFSCA.
o All other obligations as specified by the IFSCA (Fund Management) Regulations 2022 shall be applicable to the SPV.
