- Even after the introduction of “Accredited Investors only funds” by the Third Amendment, “large value fund for accredited investors” continue to subsist as a distinct category. Any reference to an ‘Accredited Investors only fund’ shall cover a ‘large value fund for accredited investors’, but not vice versa. A “large value fund for accredited investors” is entitled to all benefits that an ‘Accredited Investors only fund’ is entitled to, and some more. The fundamental difference between an “Accredited Investors only funds” and a “large value fund for accredited investors” is that, in the latter, each Accredited Investor has to invest Rs. 25 crore or more. The benefits available to a “large value fund for accredited investors” which are not available to an Accredited Investors only fund are as follows:
- Large value funds for accredited investors of Category I and II AIFs can invest up to 50% of their investable funds in an investee company. This threshold is 25% for other Category I and II AIFs. Large value funds for accredited investors of Category III AIFs can invest up to 20% of their investable funds or the net asset value of the scheme in an investee company. This threshold is 10% for other Category III AIFs.
- A large value fund for accredited investors does not have to file its PPM through a merchant banker, as is the case for other AIFs.
- At SEBI’s board meeting held on September 12, 2025, it was decided that:
- A “large value fund for accredited investors” need not follow the standard template for private placement memorandum (PPM) prescribed by SEBI;
- PPM audits are not mandatory for “large value fund for accredited investors”;
- It is interesting to note that a special privilege is provided vide Regulation 20(8) for a fund in which each investor other than the Manager, Sponsor, employees or directors of the AIF or employees or directors of the Manager, has committed to invest not less than Rs 70 cr (or an equivalent amount in currency other than Indian rupees). Such a fund does not have to comply with the rule given in Regulation 20(8) of the AIF Regulations that the members of the Investment Committee shall be responsible for ensuring that the decisions of the Investment Committee are in compliance with the AIF’s policies and procedures, provided all the investors in such a fund have furnished a waiver in respect of compliance with this rule. This exemption is not extended to an “Accredited Investors only funds” or “large value fund for accredited investors”.
- To become an accredited investor, a person needs to meet the net worth criteria given in Regulation 2(1)(ab) of the AIF Regulations and obtain an accreditation certificate from an accreditation agency. Such accreditation has to be renewed after every three years. If after the launch of an “Accredited Investors only funds”, any accredited investor fails to renew his/her/its accreditation, what would be impact? Would such an AIF cease to be a Accredited Investors only fund? We hope SEBI shall soon provide answers to these questions in a follow-on circular.
- Regulation 10(b) of the AIF Regulations requires each scheme of an AIF to have corpus of at least Rs. 20 crore. Regulation 10(c) of the AIF Regulations prohibits an AIF from accepting an investment of less than Rs. 1 crore from an investor. However, proviso to Regulation 10(c) exempts Accredited Investor from the minimum 1 cr commitment requirement. Since an Accredited Investors only fund must have a minimum corpus of Rs. 20 crore, can have any number of investors and can accept any amount from its investors, we may see Accredited Investors only funds being launched with a low minimum investment threshold (say Rs. 1 lakh per investor) and having thousands of investors. As similar to, Angel Funds which are now essentially Accredited Investors only funds no longer have a minimum corpus and can accept investments of any value from an Accredited investor.
- Professional trustee companies will doubtless welcome the new rule which states that the manager of an Accredited Investors only fund shall discharge the responsibilities and obligations of the trustee of such fund. However, if an AIF is set up in the form of a trust, can the trustee of such trust (who appoints the manager of the AIF) be entirely free of all responsibilities and liabilities? It is interesting to see how courts would view this relaxation offered by SEBI without any corresponding amendment to the Indian Trusts Act, 1882.
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