Modalities for Unliquidated Investments of AIFs

PUBLISHED ON: 23-06-2023

SEBI has issued a circular dated June 21, 2023 (available here) and provided modalities for launching liquidation scheme and in-specie distribution of unliquidated investments of scheme of Alternative Investment Funds (“AIF”), and an overview of the same is set out below:

• A scheme of AIF is required to obtain the approval of 75% of investors by value of their investment, for: (i) launching of liquidation scheme; or (ii) in-specie distribution of the unliquidated investments, as the case may be. In the event an AIF fails to obtain the requisite approval, the unliquidated investments are required to mandatorily be distributed in-specie.
• AIFs are required to arrange a bid for units, representing minimum of 25% of the value of unliquidated investments of the investment portfolio of the scheme (“Bid”). The Bid value, along with the valuation of unliquidated investments, is required to be disclosed to investors.
• The dissenting investors would be provided an option to exit the original scheme, from the Bid value arranged by the AIF. Any unsubscribed portion of the Bid would be used to provide pro-rata exit to non-dissenting investors, subject to certain conditions.
• Subsequently, the unliquidated investments would be sold to the liquidation scheme or be distributed to the investors in-specie, as the case may be. For the purpose of track record of the manager and reporting, the value of such sale would be recorded at: (i) Bid value; or (ii) INR 1 (in the event there is no Bid).