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On 2 February 2024, SEBI issued the consultation paper on flexibility to category I and II AIFs to create encumbrance on their holding of equity in infrastructure sector investee companies to facilitate raising of debt by such investee companies (the consultation paper). Through the consultation paper, SEBI has proposed amendment to the SEBI (Alternative Investment Funds) Regulations, 2012 (AIF Regulations). Some of the key proposals include:

  • Category I and II AIFs may create encumbrance on the equity of an investee company, only for the purpose of borrowing by the said investee company (if the investee company is in the business of development, operation or management of projects in any of the infrastructure sub-sectors)
  • The duration of encumbrance on equity should not be greater than the residual tenure of the scheme of the AIF
  • AIFs should not create encumbrance on equity of foreign investee company

The comment period ended on 23 February 2024.

To access the text of the consultation paper, please click here

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