TMI BlogFramework for Category I and II Alternative Investment Funds (AIFs) to create encumbrance on their holding of equity of investee companiesX X X X Extracts X X X X X X X X Extracts X X X X ..... have been amended and notified on April 25, 2024. Copy of the notification is available at link. 2. Accordingly, in terms of provisos to Regulation 16(1)(c) and 17(c) of AIF Regulations , Category I and Category II AIFs may create encumbrance on equity of investee company, which is in the business of development, operation or management of projects in any of the infrastructure sub-sectors listed in the Harmonised Master List of Infrastructure issued by the Central Government, only for the purpose of borrowing by such investee company and subject to such conditions as may be specified by the Board from time to time. 3. In this regard, the following conditions are specified: 3.1. Existing schemes of Category I or Category II AIFs who have no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AIFs shall ensure that the borrowings made by the investee company against the equity investments encumbered by the AIFs are utilised only for the purpose of development, operation or management of investee company as stated in para 2 above, and not utilised otherwise including to invest in another company. The aforesaid limitation on usage of borrowing shall be included as one of the terms of the investment agreement entered between the AIF and the investee company. 3.5. The duration of encumbrance created on the equity investments shall not be greater than the residual tenure of the scheme of the Category I or Category II AIFs. 3.6. Any Category I or Category II AIF with more than 50% foreign investment or with foreign sponsor/ manager o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and Trustee Association of India. 5. The trustee/sponsor of AIF, as the case may be, shall ensure that the Compliance Test Report prepared by the manager in terms of para 15.2 of Master Circular No. SEBI/HO/AFD/PoD1/P/CIR/2023/130 for AIFs dated July 31, 2023 , includes compliance with the provisions of this circular. 6. The circular shall come into force with immediate effect. 7. This circular is issued with the approval of the competent authority. 8. This circular is issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market. 9. The circular is available on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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