Alternative Investment Fund Registration

Overview of Alternative Investment Fund Company

An Alternate Investment Fund or AIF invests in different forms of start-ups and companies. An applicant must get registered with SEBI to start an AIF. Under the rules and regulations of SEBI, an Alternative Investment Fund refers to an entity established in form of a company, LLP, or a trust to invest in start-ups or companies. 

Types of AIFs: 

• Category I: This type of AIF invests in various start-ups and receives incentives from the government, SEBI, or other regulatory bodies. These consist of infrastructure funds, social venture funds, and SME funds. 

• Category II: These types of funds are can invest anywhere but they cannot undertake borrowings except for conducting their day-to-day operations. 

• Category III: This category of AIFs also includes funds that can make short-term investments and then sell them like hedge funds.  

Eligibility for Alternative Investment Fund Company

• Investors must be in a particular number: For registration as an Alternative Investment Fund, there must be a certain minimum no. of investors with the applicant company. However, the maximum number of investors cannot exceed 1000 in the applicant company.
• No Public Investment: Any entity willing to register as an AIF must ensure that their Article of Association (AoA) and Memorandum of Association (MoA) of the company does not invite investment from the public.
• Partnership Deed: If the AIF is formed as a Limited Liability Partnership firm under the LLP Act. 2008, then it has to furnish the original documents related to the partnership deed at the time of registration as an Alternative Investment Fund.
• Trust Deed: If the applicant company is registered as a trust or a society then the original deed of trust must be produced at the time of registration.
• Any resident be it an NRI, a foreigner, or an Indian citizen can invest in an AIF.
• Family trusts set up for benefits f the relatives won’t be eligible for registration as AIF. 
• ESOP trusts are barred from AIF registrations.
• Funds managed by scrutinization companies, welfare trusts for employees, holding companies within section 4 of the Companies Act 1956, and funds regulated by other regulators are not eligible for registration as an AIF by SEBI.