Alerts & Updates 2nd Jul 2024

SEBI limits any extension of an LVF’s tenure to five years


Vinod Joseph Partner | Mumbai
Paridhi Jain Associate | Mumbai

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  • On June 27, 2024, the Board of the Securities and Exchange Board of India (SEBI) held its 206th meeting in Mumbai and approved a proposal to limit any extension of the tenure of Large Value Funds for Accredited Investors (LVF) to 5 years. Such 5-year extension would be subject to the approval of 2/3rd of the unit holders by value. If at the end of the extension period the LVF has unliquidated investments, the LVF can opt for a dissolution period as is permitted for all AIFs.

    Existing LVF schemes that have not specified a cap in the extension of their tenures in their PPMs or whose extension period is beyond 5 years, are required to amend their PPM to align the relevant clauses in their PPMs with the aforesaid requirement, within 3   months from the date of issuance of a circular by SEBI in this regard. While realigning the term, such schemes shall have the flexibility to modify their original base tenure of  the scheme with the unanimous consent of all their investors. So, if a LVF Scheme’s original tenure is 8 years and the PPM permits the extension of its term by up to 8 years, the Fund is expected to amend its PPM so that any extension can only be up to 5 years. It is likely that SEBI’s circular which implements this proposal will clarify that investor consent is not requirement for such modification and alignment of the PPM with SEBI’s proposal. However, if at the time of the alignment, the investors unanimously resolve to modify the original term of the Scheme from 8 years to 12 years, they may do so. This would be a one-in-a-lifetime opportunity for the LVF Scheme to amend its base term.

    The Securities and Exchange Board of India (Alternative Investment Funds), 2012 (SEBI AIF Regulations) define a “Large Value Fund for Accredited Investors” to mean an Alternative Investment Fund (AIF) or scheme of an  AIF in which each investor (other than the Manager, Sponsor, employees or directors of the AIF or employees or directors of the Manager) is an accredited investor and invests not less than seventy crore rupees. The SEBI AIF Regulations offer a number of exemptions to LVFs, one of which can be found in the proviso to Regulation 13(5) of the SEBI AIF Regulations. Regulation 13(5) of the SEBI AIF Regulations states that the tenure of any close ended AIF may be extended for up to 2  years, subject to the approval of 2/3rd  of the unit holders by value of their investment in the AIF. The proviso to this regulation carves out an exemption for LVFs and states that an LVF can extend its tenure beyond 2 years, subject to terms of its contribution agreement, other fund documents and such conditions as may be specified by SEBI from time to time.

    SEBI’s new proposal takes away the freedom given to LVFs until now, to extend their tenure as much as they wish, as long as the LVF’s fund documents permit such extension. Until now, if an LVF’s PPM states that the trustee of the LVF can, at its sole discretion and in the interest of the investors, extend its term by 10 years, the trustee of the LVF could do so, provided such extension is in the interest of the investors. Such LVF Schemes will now have to modify the PPMs.

    The minutes of the Board meeting held on June 27, 2024 can be found here.

  • ELP Comments

    Henceforth, an LVF cannot extend the tenure prescribed by its PPM beyond 5 years. Further, any extension would be subject to the approval of 2/3rd of the unit holders by value, just as in the case of other AIFs. This new rule is undoubtedly motivated by the recent amendments to SEBI AIF Regulations replacing the concept of Liquidation Scheme with Dissolution Period, which has made it easier for AIFs to liquidate their investments and windup. The minutes of SEBI’s Board meeting state that SEBI’s objective is to protect investors / potential investors from delayed disclosure/  recognition of true asset quality, liquidity, fund value, and performance of AIFs/ managers. LVFs are considered to be “big boys” who need little protection from SEBI and can look after themselves. However, it looks like SEBI doesn’t wish to leave even LVFs entirely unprotected.

    We hope you have found this information useful. For any queries/clarifications please write to us at  or write to our authors:

    Vinod Joseph, Partner – Email –

    Paridhi Jain, Associate, Email –


Disclaimer: The information contained in this document is intended for informational purposes only and does not constitute legal opinion or advice. This document is not intended to address the circumstances of any individual or corporate body. Readers should not act on the information provided herein without appropriate professional advice after a thorough examination of the facts and circumstances of a situation. There can be no assurance that the judicial/quasi-judicial authorities may not take a position contrary to the views mentioned herein.