Sebi eases winding-up norms for AIFs, introduces 'inoperative fund' framework
Benchmarks Nifty22,278.30-324.75FEATURED FUNDS★★★★★Motilal Oswal Midcap Fund Direct-Growth5Y Return19.49 % Invest NowEnter search text:The Economic Times daily newspaper is available online now. Read Today's Paper Sebi…
Sebi has introduced a new framework allowing Alternative Investment Funds (AIFs) to retain liquidation proceeds beyond their fund life under specific conditions. This move aims to address practical challenges during winding-up, enabling AIFs to manage pending liabilities and operational expenses more effectively.
Market regulator Sebi on Tuesday introduced a new framework allowing Alternative Investment Funds (AIFs) to retain liquidation proceeds beyond their prescribed fund life under certain conditions and seek an "Inoperative Fund" status, providing greater flexibility during the winding-up process.The move follows amendments to the existing Sebi rules, and is aimed at addressing practical challenges faced by AIFs while settling liabilities, litigation matters and residual operational expenses after the expiry of a fund's tenure.
Under the new guidelines, AIFs and their schemes can retain liquidation proceeds beyond the liquidation or dissolution period if they have received litigation notices, regulatory communications, tax-related demands or other legal claims that may result in future liabilities. Funds can also retain proceeds for anticipated liabilities if they secure consent from at least 75% of investors by value.
Sebi has additionally permitted retention of money for residual winding-up expenses, provided the amount is supported by invoices or comparable historical expense records. Such retention for operational expenses cannot continue beyond three years from the end of the permissible fund life.
The regulator said managers must disclose the amount proposed to be retained and the estimated retention period to investors while seeking consent for anticipated liabilities.
Live Events
To facilitate closure of fund structures, Sebi has also introduced an "Inoperative Fund" category. AIFs that have retained money for pending liabilities and wish to surrender their registration can apply for this status. Funds that do not retain any money but want to continue registration while awaiting the outcome of pending litigation may also seek the designation.
Applications for obtaining the status will have to be submitted directly to Sebi in a prescribed format.
Once tagged as an Inoperative Fund, the AIF will not be permitted to launch new schemes and cannot charge management fees on existing schemes. Retained money must be invested only in liquid instruments permitted under Regulation 15(1)(f) of the AIF regulations.
Sebi has simultaneously granted significant compliance relief to such funds. Inoperative Funds will be exempt from several reporting and regulatory requirements, including quarterly and annual activity reports, compliance test reports, performance benchmarking submissions, periodic investor disclosures, valuation requirements and certain certification norms for key investment personnel.
The regulator has, however, mandated annual reporting of retained monies and outstanding liabilities. AIFs and Inoperative Funds must submit a status report to both Sebi and investors within 30 days of the end of every financial year until all liabilities are settled and pending amounts are distributed.
The framework has also been extended to Venture Capital Funds registered under the erstwhile Sebi (Venture Capital Funds) Regulations, 1996.
Industry participants have long sought clarity on handling residual liabilities after the formal investment period ends. In many cases, funds faced delays in winding up because of ongoing tax disputes, litigation or regulatory proceedings even after all investments had been liquidated.
The new circular seeks to address those concerns by providing a structured mechanism for retaining proceeds, reducing compliance burdens and allowing funds to formally transition into an inactive status while resolving outstanding obligations.
Add as a Reliable and Trusted News Source Add Now!
(You can now subscribe to our ETMarkets WhatsApp channel)
Read More News onSebi guidelines for AIFsAlternative Investment Funds retention policyInoperative Fund frameworkretention of liquidation proceedsAIFs compliance requirements
(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)
Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price
...moreless(You can now subscribe to our ETMarkets WhatsApp channel)
Read More News onSebi guidelines for AIFsAlternative Investment Funds retention policyInoperative Fund frameworkretention of liquidation proceedsAIFs compliance requirements
(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)
Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price
...morelessPrime ExclusivesInvestment IdeasStock Report PlusePaperWealth EditionAirlines Q2 turbulence: Fewer passengers, rising fares and a crude shock
The NBFC saga - Part 1: How RBI moved from protecting depositors to policing systemic risk
Britannia’s next big bet for young India lies beyond biscuits
The world is witnessing a bond rout. Why should it matter to you?
Q2 earnings season: Will it settle or add to confusion in the stock market?
How Sebi busted Growpital’s ‘assured’ returns, LLPs and money trail
- 1
- 2
- 3
& personalised newslettersLogin NowUnlimited AccessStarting @ Rs120/monthGet access to exclusive stories, expert opinions &
in-depth stock reportsSubscribe NowET
Unlock Access to All Exclusives with ETPrime FREE TRIAL
15 Days Free: Unlock All ETPrime Exclusives, Market Tools & ePapers
Trial offer expiring in00 : 05 : 00
I'd rather pay ₹2599 nowUh-oh! This is an exclusive story available for selected readers only.
Worry not. You’re just a step away.
Prime Account Detected!
It seems like you're already an ETPrime member with
Login using your ET Prime credentials to enjoy all member benefits
Log out of your current logged-in account and log in again using your ET Prime credentials to enjoy all member benefits.
Unlock ETPrime's Exclusive Stories Today!
Big Price Drop! Flat 40% Off
Student Only OfferAlready a Member? Sign In nowAlready a Member? Sign In nowAlready a Member? Sign In nowOffer Exclusively For You
Save up to Rs. 700/-
ON ET PRIME MEMBERSHIP
Avail OfferOffer Exclusively For You
Get 1 Year Free
With 1 and 2-Year ET prime membership
Avail OfferOffer Exclusively For You
Get 1 Year Free
With 1 and 2-Year ET prime membership
Avail OfferOffer Exclusively For You
Get Flat 40% Off
Then ₹ 1749 for 1 year
Avail OfferOffer Exclusively For You
ET Prime at ₹ 49 for 1 month
Then ₹ 1749 for 1 year
Avail OfferSpecial Offer
Get flat 40% off on ETPrime
Avail OfferAvail OfferClaim NowAlready a Member? Sign In nowNeed Assistance?
Connect with an ETPrime expert for personalized support and guidance
+91 9484700004'; }); } if(listing) { var h3 = "You tried reading " + listArr.length + " locked stories in the past " + threshold + " days.", h4 = "Become an ET Prime member and don't miss out on these exclusive stories."; var html = '' + h3 + '
' + h4 + '
- ' + listing + '
What’s Included with
ETPrime Membership
1Exclusive Insights That Matter
Uncover the truth with our investigative stories
Make strategic moves using the real-world case studies
Read industry-specific stories to identify emerging trends
Spot opportunities with in-depth insights that matter
Trump temper on H-1B visas is forcing Indians to do these things to stay put in US
What Adani’s US indictment means for India Inc’s overseas fundraising
Why veterans like Reliance, L&T are on acquisition spree? Aswath Damodaran has an answer.
Will China’s dollar bond sale in Saudi Arabia trump the US in financial world?
Huawei launches its own OS to compete with Google and Apple. But can it win beyond China?
The problem with lab grown diamonds
Why a falling rupee is a better option for the economy
A list of top 20 momentum stocks that have delivered massive returns in one year
2Invest Wisely With Smart Market Tools & Investment Ideas
Alpha Trade
Get daily trade ideas from SEBI-registered research analysts.
Investment Ideas
Grow your wealth with stock ideas & sectoral trends.
Stock Reports Plus
All-in-one stock research with Stock Score, peer comparison & key signals.
BigBull Portfolio
Get to know where the market bulls are investing to identify the right stocks.
Stock Analyzer
Check the score based on the company's fundamentals, solvency, growth, risk & ownership to decide the right stocks.
Market Mood
Analyze the market sentiments & identify the trend reversal for strategic decisions.
Stock Talk Live at 9 AM Daily
Ask your stock queries & get assured replies by ET appointed, SEBI registered experts.
3Stay informed anytime, anywhere with ET ePaper
ePaper - Print View
Read the PDF version of ET newspaper. Download & access it offline anytime.
ePaper - Digital View
Read your daily newspaper in Digital View & get it delivered to your inbox everyday.
Wealth Edition
Manage your money efficiently with this weekly money management guide.
TOI ePaper
Read the PDF version of TOI newspaper. Download & access it offline anytime.
Deep Explainers
Explore the In-depth explanation of complex topics for everyday life decisions.
Health+ Stories
Get fitter with daily health insights committed to your well-being.
Personal Finance+ Stories
Manage your wealth better with in-depth insights & updates on finance.
5Enjoy Complimentary Subscriptions From Top Brands
Stream new documentaries from all across the world every day.
Stories you might be interested in
Figures reflect the source report and its stated period. This article is for information and is not investment advice.
