TaxTMI 
TaxTMI 
Specific due diligence of investors and investments of AIFs
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....acilitation of circumvention of such laws, as may be specified by SEBI from time to time. 2. In this regard, the specific due diligence to be carried out by AIFs, managers of AIFs and their Key Management Personnel, with respect to investors and investments of the AIF, to prevent facilitation of circumvention of the following regulatory frameworks, are being specified in this circular - I. Provisions of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 ('ICDR Regulations'), and other regulations of SEBI wherein benefits or relaxations have been provided to entities designated as Qualified Institutional Buyers (QIBs). II. Provisions of the 'Securitisation and Reconstruction of Financial Assets and Enf....
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..... AIFs have been notified as QBs in terms of clause (u) of sub-section (1) of section 2 of SARFAESI Act, and therefore, are eligible to subscribe to Security Receipts (SRs) issued by an Asset Reconstruction Company (ARC). 4.2. In order to prevent AIFs from facilitating investors who are otherwise ineligible for QB status on their own, in availing benefits designated for QBs the following is specified: 4.2.1. For every scheme of AIFs having an investor, or investors belonging to the same group, who contribute(s) 50 percent or more to the corpus of the scheme, necessary due diligence as per the implementation standards formulated by SFA, shall be carried out prior to making any investments in SRs issued by ARCs or availing benefits desi....
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....all ensure that the scheme does not make any investment that would lead to the RBI regulated lender/entity acquiring or holding an interest/exposure in the investee company indirectly (that is, through investment in a scheme of an AIF), that they are not permitted to acquire or hold directly. 6. Schemes of AIFs falling under the ambit of provisions at paras 3.2.1, 4.2.1 and 5.1.1 above, shall proceed with the proposed investment in accordance with the respective implementation standards as formulated by SFA. If the proposed investment does not satisfy the due diligence checks specified by SFA for making investment: 6.1. either such investor or investors of same group as referred at paras 3.2.1, 4.2.1 and 5.1.1 above shall be excluded ....
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....y, shall invest only with the approval of the Government. 8.2. To ascertain whether investors from countries sharing land border with India are investing in Indian companies through AIFs, the following is specified - 8.2.1. For every scheme of AIFs where 50 percent or more of the corpus of the scheme is contributed by investors - (a) who are citizens of/are from/are situated in a country which shares land border with India, or, (b) whose beneficial owners, as determined in terms of sub-rule (3) of Rule 9 of the Prevention of Money-laundering (Maintenance of Records) Rules, 2005, are citizens of/are from/are situated in a country which shares land border with India, necessary due diligence as per the implemen....
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....heir Key Management Personnel for compliance with the provisions of this circular. Such implementation standards shall be published on websites of the industry associations which are part of the SFA, i.e., Indian Venture and Alternate Capital Association (IVCA), PE VC CFO Association and Trustee Association of India, within 1 working day of issuance of this circular. 12. The trustee/sponsor of AIF, as the case may be, shall ensure that the 'Compliance Test Report' prepared by the manager in terms of Chapter 15 of Master Circular for AIFs, includes compliance with the provisions of this circular. 13. This circular shall come into force with immediate effect. 14. This circular is issued with the approval of the competent authority. ....