Alerts & Updates 25th Mar 2026
Regulation 29(7) of the SEBI (Alternative Investment Fund) Regulations, 2012 (AIF Regulations) prescribes that after an AIF scheme’s term expires, the assets of the scheme should be liquidated within the liquidation period and the proceeds distributed to investors in the AIF scheme after satisfying all liabilities of the scheme. Regulation 2(1) (pb) of the AIF Regulations defines Liquidation Period as a period of one year following the expiry of the tenure of the scheme. Regulation 29(11) of the AIF Regulations provides that upon winding up of the AIF, its certificate of registration shall be surrendered to the Board. An AIF filing for surrender of its registration is required to submit various documents /declarations, including the AIF’s bank account statement evidencing NIL balance, to SEBI.
On February 5, 2026, SEBI had issued a consultation paper (Consultation Paper) seeking public comments on proposals aimed at streamlining the processes pertaining to the winding up of AIF schemes and the surrender of AIF registrations. Pursuant to the Consultation Paper, on March 23, 2026, SEBI’s Board approved amendments to the AIF Regulations to permit AIF schemes to retain the liquidation proceeds of their portfolios post completion of their tenure in certain specific circumstances. SEBI’s Board has also approved a framework for tagging certain AIFs as ‘inoperative funds’ with lighter compliance requirements till the surrender of their registration certificates.
Grounds for retaining funds beyond permissible fund life:
Once AIF Regulations are amended in line with the decision taken by SEBI’s Board, AIF schemes may retain funds beyond the permissible fund life in the following specific circumstances:
Tagging AIFs as “inoperative funds”
AIFs which intend to surrender registration and have one or more schemes retaining funds under one of the three grounds mentioned above may be tagged as “inoperative”. The compliance requirements for such funds shall be lesser compared to other AIFs, including discontinuation of periodic filings, PPM updation, and performance benchmarking.
| ELP Comments |
| The three specific circumstances in which AIF schemes may retain funds beyond the permissible fund life are on the same lines as those provided in the Consultation Paper, albeit with some minor drafting changes. The Consultation Paper had proposed that all such retained monies must be invested only in liquid, high‑quality instruments in line with Regulation 15(f) until final distribution. The minutes of SEBI’s Board meeting don’t have this stipulation, but it is likely to be provided for in the formal amendments to the AIF Regulations. The Consultation Paper had also proposed that SEBI should prescribe specific heads of operational expenses for which retention of monies beyond the permissible fund life will be allowed. However, no such prescription can be found in the minutes of SEBI’s Board meeting in this regard. With respect to AIFs that are tagged as “inoperative”, the following proposals in the Consultation Paper are not found in the minutes of SEBI’s Board meeting:
It remains to be seen if the abovementioned proposals will be incorporated in the AIF Regulations when the formal amendments to the AIF Regulations pursuant to the Board meeting are issued. |
The minutes of SEBI’s Board meeting held on March 23, 2026, can be found here.
The Consultation Paper can be found here.
We hope you have found this information useful. For any queries/clarifications, please write to us at insights@elp-in.com or write to our authors:
Vinod Joseph, Partner – Email – vinodjoseph@elp-in.com
Paridhi Jain, Associate – Email – paridhijain@elp-in.com
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