SEBI, vide a notification dated 24 January 2022, has amended the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012 (“AIF Regulations”) and inserted chapter III-B on Special Situation Funds (“SSFs”) specifying the definitions, applicability, registration process, and investment norms for these SSFs.
As per the amendment, SSFs shall be a sub-category under category – I Alternative Investment Funds (“AIF”) that shall invest in special situation assets in accordance with the investment objectives of the SSF and may even act as a resolution applicant under the Insolvency and Bankruptcy Code, 2016 (“Code”). SSFs intending to act as a resolution applicant shall
ensure compliance with the eligibility requirements under the Code.
An applicant may apply for registration as a SSF in accordance with the provisions of chapter II of the AIF Regulations.
Special situation assets in which SSFs may invest include a stressed loan available for acquisition in terms of Master Direction – Reserve Bank of India (Transfer of Loan Exposures) Directions, 2021, or as part of a resolution plan approved under the Code or in terms of any other policy of the Reserve Bank of India (“RBI”) or Government of India. Special situation
assets also include security receipts issued by an asset reconstruction company registered with RBI, securities of certain kinds of investee companies, or any other asset as may be specified by SEBI.
The notification further clarified that SSFs shall not accept investments from any other AIF other than an SSF. Further, SEBI vide a circular dated 27 January 2022, has clarified that the scheme of an SSF shall have a minimum corpus of INR 1,000,000,000 (Indian Rupees One Billion). The minimum investment by an investor seeking to invest in a SSF is INR 100,000,000 (Indian Rupees One Hundred Million) whereas for investors who are employees or directors of the SSF or employees or directors of the manager of the SSF, the minimum value of investment shall be INR 2,500,000 (Indian Rupees Two Million Five Hundred Thousand).
Please click here and here to read the amendment notification and the SEBI circular respectively. Further, please click here to read our detailed coverage of this update.
For further information, please contact:
Souvik Ganguly, Partner, Acuity Law
al@acuitylaw.co.in
