Collective Investment Scheme Company Registration
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Overview of Collective Investment Schemes (CIS)
There are various avenues available for investors to make better returns and collective investment schemes are one among them. Serving as a flexible savings option for corporate bodies and individual investors, these schemes serve the need of saving funds for future needs. This is defined as an arrangement or scheme offered by any company where contributions are made by investors to pool money which can be utilized to receive profits, property, income, or produce. These acquired assets (profits or property) are then monitored or looked after by a manager on behalf of the scheme investors. Investors do not have the day to day control over operations or management of such arrangements. In India, mutual funds and unit trusts are excluded from CIS.
Participants of CIS
Fund Manager of the CIS
A fund manager is a qualified expert who manages the investment resolution of the schemes. The person suggests reconciliations, trading valuation, and unit value of schemes.
CIS Shareholders
Shareholders are the individuals who invest in the schemes and form a money pool for the scheme. These individuals possess a primary right over the assets of the scheme.
The Trustee of CIS
The Trustee must ensure that the scheme and the managers follow all the regulations and related rules. The trustee oversees that CIS regulations of 1999 are enforced effectively, and the investors’ rights are protected.
Eligibility for Collective Investment Schemes
- An applicant must be registered with the Registrar of companies under the Companies Act.
- The objectives of the Collective Investment Scheme’s management must be specified.
- The applicant should be proper and fit according to the guidelines of the regulating authority.
- A net worth of Rs. 5 crores for the applicant.
- The infrastructural capacity of the applicant company must be adequate to perform duties related to CIS efficiently.
- There must be a minimum 50% of the directors who are independent and not associated with the management of the investment scheme company.
- The integrity and public image of the directors must be good. There should not be any pending cases or insolvency procedures against them.
- The applicant must not be associated with any person who has been declined registration in the past.
What schemes do not qualify as CIS?
- Any scheme or arrangement sponsored by a Co-operative Society.
- A scheme which accepts deposits via an NBFC.
- A scheme offered as an insurance contract.
- Insurance schemes or pension schemes constituted under Employees Provident Fund can’t qualify as CIS.
- Any scheme which accepts deposits under Section 59A of the Companies Act.
- A scheme accepting deposits through a Nidhi or mutual benefits society.
- If contributions made to the scheme are in the nature of subscription to any mutual fund, then it cannot be qualified as CIS.
- If the scheme offering company is under the Chit business defined under clause (d) Section 2 of the Chit Fund Act.
The following documents are required for registration:
- The Incorporation Certificate of the company.
- Details of directors’ related to the company and documents regarding their professional profile.
- Information regarding the contact information about the applicant.
- Copies of the audit report of the company, profit and loss account, balance sheet, and yearly appraisal report to unitholders within 2 months from the date of closure of the financial year.
- Any other sort of business information associated with the plans of the company.
- Memorandum of Association and Articles of Association of the Entity stating its objectives.
- Any other relevant document as asked by the board.
Procedure for Collective Investment Schemes Registration
- The Collective Investment Management Company must be registered by Registrar of Companies under the Companies Act 2013 before applying for registration from SEBI.
- The company’s objective must be to offer a collective investment scheme after registration.
- The company must file the application for registration by filing Form A. They must submit the prescribed fee according to schedule 11 and the documents necessary for registration.
- Once the board receives the application, they will review it along with the documents. The board may reject an incomplete or erroneous application. The cause of rejection could also be a failure of the company to meet the standards set for registration. However, the board gives one-month time to all companies to rectify any mistakes or furnish any necessary document before rejecting the application. It may also ask any person to appear before the board in connection with the documents before granting registration certificate.
The CIS companies come under the CIS regulations 1999 of SEBI. The registration certificate to CIS companies is also granted by SEBI.
No, companies accepting deposits from NBFCs, Nidhi Companies or EPF are not eligible for CIS.
After submission of the application, the SEBI reviews the application along with documents of the company. If the board finds any discrepancy in the application, then it rejects it. In case there is any relevant document that is not filed with the board, it gives the application a time of 30 days to furnish the documents. If the applicants fail to submit the required document within 30 days, then the application is rejected.
Investor’s money is pooled along with money from other investors, and it is spread over the entire range of assets within the fund. The investment during a fund is split into shares, and therefore the number of shares held to represent an investor’s proportionate ownership of the fund’s overall assets, and therefore the return on those assets generated will be shared proportionally to the ownership.
The minimum net worth required to get the Collective Investment Scheme Company Registration is Rs. 5 crores. The infrastructure of the company should also be capable enough to run the business of managing CIS.
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