AIF Regulatory Framework and Fund Structures
Domain 1 - AIF regulatory framework and fund structures
This domain tests what legally qualifies as an AIF in India, the legal forms a fund may take, the SEBI registration route, and the hard structural limits - corpus, ticket size, investor count, tenure - that must be satisfied before a scheme can launch.
Definition and legal form
An AIF is a privately pooled vehicle established or incorporated in India that collects funds from Indian or foreign investors under a defined investment policy for their benefit, and is not covered by the SEBI (Mutual Funds) Regulations, 1996 or the CIS Regulations, 1999. Family trusts, ESOP/employee benefit trusts and funds of securitisation or reconstruction companies sit outside the definition. An AIF may be set up as a trust (with a SEBI-registered trustee), a company, an LLP, or a body corporate.
Registration and launch
- SEBI registration is mandatory: application in Form A, certificate in Form B; no scheme may launch without it.
- Private placement only: no public advertisement or solicitation; the PPM must be filed with SEBI at least 30 days before the scheme opens.
- Minimum corpus ₹20 crore per scheme; minimum commitment ₹1 crore per investor (₹25 lakh for employees/directors of the manager). Angel funds: corpus ₹10 crore, ticket ₹25 lakh, maximum 49 investors. General cap: 1,000 investors per scheme.
- Category I and II funds are close-ended with a minimum 3-year tenure, extendable by up to 2 years with consent of two-thirds of investors by value.
Worked example
A sponsor plans a Category II private equity fund for 60 investors at ₹50 lakh each, tenure 2 years, PPM filed on the day of launch. Three defects: commitment below ₹1 crore; tenure below the 3-year minimum; PPM not filed 30 days before launch. The ₹30 crore corpus is adequate, but the scheme cannot launch as structured.
Traps
Do not import mutual fund assumptions into AIFs (retail tickets, open public pooling); the 1,000-investor cap applies per scheme, not per manager; minimum corpus applies scheme by scheme, not to the manager's total assets.