Sebi releases framework for entering unliquidated assets of AIFs into dissolution period

If an alternative investment fund (AIF) or its manager wants to enter unliquidated assets of a scheme into dissolution period, then they have to arrange bid for a minimum of 25 percent of the value of the unliquidated assets.

Also, the performance of the manager during the Dissolution Period will be captured separately and reported to Performance Benchmarking Agencies, distinct from the performance of the scheme before entering into dissolution period, said a circular from the market regulator. The manager will also not be allowed to charge a fee during the dissolution period.

Also read: Sebi releases framework for AIF-I and II to raise debt by pledging equity of investee companies

On April 25, the Securities and Exchange Board of India (Sebi) released a circular on conditions to be followed to enter unliquidated assets of a scheme into dissolution period.

Before seeking the consent of the investors to enter the assets into dissolution period, the fund or the manager must disclose the following to the investors.

1.The proposed tenure of the Dissolution Period, details of unliquidated investments, value recognition of the unliquidated investments for reporting to Performance Benchmarking Agencies, etc.

2.An indicative range of bid value, along with the valuation of the unliquidated investments carried out by two independent valuers.

Before the expiry of the liquidation period, the AIF / manager should intimate Sebi about obtaining the investor consent and the investors’ decision to enter into Dissolution Period.

Also read: BSE may see a big jump in regulatory fee; Sebi asks it to calculate annual turnover based on notional value

The circular also gave directions on the options that need to be given to dissenting investors and how performance of the fund’s manager should be captured in various scenarios.

If the scheme of the AIF fails to sell the unliquidated investments during the Dissolution Period, such investments shall be mandatorily distributed in specie to the investors. It is clarified that no further extension or Liquidation Period shall be available to these schemes after the expiry of Dissolution Period, said the circular.