CIRCULAR
SEBI/HO/AFD-1/PoD/P/CIR/2023/053 April 10, 2023
To,
All Alternative Investment Funds (AIFs)
Sir/Madam,
Sub: Guidelines with respect to excusing or excluding an investor
from an investment of AIF
1. SEBI Circular No. SEBI/HO/IMD/DF6/CIR/P/2020/24 dated February 05, 2020, inter-
alia, introduced template(s) for Private Placement Memorandum (PPM) for AIFs,
providing certain minimum level of information to be disclosed in a simple and
comparable format.
2. It has been observed from the information disclosed in PPMs that, there is
inconsistency and lack of adequate disclosure with respect to certain industry
practices.
3. In this context, a proposal to review the information disclosed in PPM under the term
‘Excuse and Exclusion’ for excusing or excluding an investor from an investment of
the AIF, was deliberated in Alternative Investment Policy Advisory Committee
(‘AIPAC’).
4. Taking into account the recommendations of AIPAC, it has been decided that, an AIF
may excuse its investor from participating in a particular investment in the following
circumstances:
4.1. If the investor, based on the opinion of a legal professional/legal advisor,
confirms that its participation in the investment opportunity would be in violation
of an applicable law or regulation; or
4.2. If the investor, as part of contribution agreement or any other agreement signed
with the AIF, had disclosed to the manager that, participation of the investor in
such investment opportunity would be in contravention to the internal policy of
the investor. Manager shall ensure that terms of such agreement with the
investor include reporting of any change in the disclosed internal policy, to the
AIF, within 15 days of such change.
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5. Further, an AIF may exclude an investor from participating in a particular investment
opportunity, if the manager of the AIF is satisfied that the participation of such investor
in the investment opportunity would lead to the scheme of the AIF being in violation of
applicable law or regulation or would result in material adverse effect on the scheme
of the AIF. The manager shall record the rationale for such exclusion, along with the
documents relied upon, if any.
6. If the investor of an AIF is also an AIF or any other investment vehicle, such investor
may be partially excused or excluded from participation in an investment opportunity,
to the extent of the contribution of the said fund/investment vehicle’s underlying
investors who are to be excused or excluded from such investment opportunity. The
manager of AIF shall record the rationale for such excuse or exclusion along with the
supporting documents, if any.
7. This circular shall come into force with immediate effect.
8. This circular is issued with the approval of the competent authority.
9. 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.
10. The circular is available on SEBI website at www.sebi.gov.in under the categories
"Legal framework - Circulars" and "Info for - Alternative Investment Funds”.
Yours faithfully,
Sanjay Singh Bhati
Deputy General Manager
Tel no.: +91-22-26449222
ssbhati@sebi.gov.in
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