Various changes by SEBI & MCA

SEBI ISSUES GUIDELINES FOR LARGE VALUE FUND FOR ACCREDITED INVESTORS UNDER THE AIF REGULATIONS; MANDATES APPOINTMENT OF COMPLIANCE OFFICER FOR MANAGERS OF AIFS | MCA PROVIDES 15 DAY PERIOD FOR RE-SUBMISSION OF DEFECTIVE/INCOMPLETE FORM FOR REMOVAL OF COMPANY’S NAME

Following changes have been introduced by SEBI and MCA:

A. Guidelines for framework of large value funds for accredited investors, and mandatory appointment of compliance officer under the AIF Regulations: The SEBI (Alternative Investment Funds) Regulations, 2012 (AIF Regulations) were amended to provide certain relaxations from regulatory requirements to “large value fund for accredited investors” (LVF) including ease of diversification norms, extension of tenure beyond 2 years, relaxation of minimum investment requirement, etc. SEBI has now laid down guidelines for LVF in relation to filing of LVF schemes with SEBI and extension of tenure. Separately, SEBI has also laid down the requirement of appointing a compliance officer for managers of all alternative investment funds (AIFs).

B. Re-submission of defective/ incomplete application for removal of name and other changes: MCA has amended the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 whereby a period of 15 days (with a further extension of 15 days) will now be provided to the applicant seeking removal of the name of a company to remove any defects/ complete the requisite form and re-submit the same to the Registrar of Companies. Also, changes have also been made to the format of Forms STK-1, STK-5 and STK-5A.

The above changes have been analysed below.

A. Guidelines for LVFs for accredited investors, mandatory appointment of compliance officer under the AIF Regulations
1. Guidelines for LVFs for accredited investors
Pursuant to the introduction of the framework of “accredited investors” vide the SEBI (Alternative Investment Funds) (Third Amendment) Regulations, 2021 dated August 3, 2021, the SEBI (Alternative Investment Funds) Regulations, 2012 (AIF Regulations) were amended to provide certain relaxations from regulatory requirements to “large value fund for accredited investors” (LVF) including ease of diversification norms, extension of tenure beyond 2 years, relaxation of minimum investment requirement, etc. SEBI has now laid down the following guidelines for LVF in relation to filing of LVF schemes with SEBI and extension of tenure.

Provision under AIF Regulations	Guidelines
Exemption from filing of private placement memorandum with SEBI by LVFs In terms of proviso to Regulation 12 of AIF Regulations, LVFs are exempt from filing their placement memorandum with SEBI through merchant banker and incorporate comments of SEBI, if any, in their placement memorandum i.e. LVFs can launch their scheme under intimation to SEBI.	In this regard, following has now been prescribed: *Submission of undertaking while filing placement memorandum: While filing the placement memorandum for LVF schemes with SEBI, a duly signed and stamped undertaking by CEO of the manager to the AIF (or person holding equivalent role or position depending on the legal structure of manager) and compliance officer of manager to the AIF is to be submitted in the format as prescribed by SEBI. The format for the undertaking inter alia* provides affirmation on the following: – Independent exercise of due-diligence regarding information given in the placement memorandum, including the veracity and adequacy of disclosure made therein; – AIF, its sponsor and manager are fit and proper persons; – All the material disclosures in respect of the fund raising, investment by the scheme and management thereof have been made in the placement memorandum and are based on latest available information; – Satisfaction that the proposed activities of the scheme are bonafide, fall within the objectives of the fund as specified in the articles of association or trust deed or partnership deed of the AIF and are to meet the stated investment objective; – Disclosures made in the placement memorandum are true fair and necessary to enable the investors to make an informed decision with respect to the investment in the proposed scheme and are in accordance with the AIF Regulations and applicable legal requirements; – Sponsor or manager are capable of fulfilling the requirement of maintaining continuing interest in the scheme as per the AIF Regulations; Details of disclosures in the placement memorandum with respect to compliance with provisions of the AIF Regulations, applicable to the proposed LVF scheme, and information with respect to disclosures in the placement memorandum are also required to be annexed to the undertaking as per the format now prescribed by SEBI. *Deadline for submission of undertaking if LVF scheme has already been filed by SEBI: In case the LVF schemes have already been filed with SEBI, a similar signed and stamped undertaking by CEO of the manager to the AIF (or person holding equivalent role or position depending on the legal structure of manager) and compliance officer of manager to the AIF is to be submitted to SEBI on or before July 31, 2022.*
Extension of tenure of AIF beyond 2 years for LVFs Close ended AIFs are permitted to extend its tenure up to 2 years with the approval of 2/3rd of its unit holders by value of their investment in the said AIF. LVFs are exempt from this requirement whereby LVFs are permitted to extend its tenure beyond 2 years, subject to terms of the contribution agreement, other fund documents and such conditions as may be specified by SEBI from time to time.	In this regard, the following conditions have been prescribed: *Terms and conditions for extension to be laid down in relevant fund documents: The placement memorandum, contribution agreement or other fund documents of LVF shall lay down terms and conditions for extension of the tenure beyond 2 years to enable the investors to take an informed decision. Approval required from trustee/board of directors/designated partners: LVF shall be required to obtain approval from its trustee/board of directors/designated partners (depending upon the legal structure of the LVF) for extending the tenure beyond 2 years, at least 1 month before expiration of the fund tenure or extended tenure. Liquidation and winding up of LVF if requisite conditions are not fulfilled*: If the requisite conditions specified in the placement memorandum, contribution agreement or other fund documents of LVF for extension of tenure beyond 2 years are not fulfilled, LVF shall liquidate and wind up in accordance with AIF Regulations and circulars issued thereunder.

Provision under AIF Regulations

Guidelines

Exemption from filing of private placement memorandum with SEBI by LVFs

In terms of proviso to Regulation 12 of AIF Regulations, LVFs are exempt from filing their placement memorandum with SEBI through merchant banker and incorporate comments of SEBI, if any, in their placement memorandum i.e. LVFs can launch their scheme under intimation to SEBI.

In this regard, following has now been prescribed:

Submission of undertaking while filing placement memorandum: While filing the placement memorandum for LVF schemes with SEBI, a duly signed and stamped undertaking by CEO of the manager to the AIF (or person holding equivalent role or position depending on the legal structure of manager) and compliance officer of manager to the AIF is to be submitted in the format as prescribed by SEBI.

The format for the undertaking inter alia provides affirmation on the following:

– Independent exercise of due-diligence regarding information given in the placement memorandum, including the veracity and adequacy of disclosure made therein;

– AIF, its sponsor and manager are fit and proper persons;

– All the material disclosures in respect of the fund raising, investment by the scheme and management thereof have been made in the placement memorandum and are based on latest available information;

– Satisfaction that the proposed activities of the scheme are bonafide, fall within the objectives of the fund as specified in the articles of association or trust deed or partnership deed of the AIF and are to meet the stated investment objective;

– Disclosures made in the placement memorandum are true fair and necessary to enable the investors to make an informed decision with respect to the investment in the proposed scheme and are in accordance with the AIF Regulations and applicable legal requirements;

– Sponsor or manager are capable of fulfilling the requirement of maintaining continuing interest in the scheme as per the AIF Regulations;

Details of disclosures in the placement memorandum with respect to compliance with provisions of the AIF Regulations, applicable to the proposed LVF scheme, and information with respect to disclosures in the placement memorandum are also required to be annexed to the undertaking as per the format now prescribed by SEBI.

Deadline for submission of undertaking if LVF scheme has already been filed by SEBI: In case the LVF schemes have already been filed with SEBI, a similar signed and stamped undertaking by CEO of the manager to the AIF (or person holding equivalent role or position depending on the legal structure of manager) and compliance officer of manager to the AIF is to be submitted to SEBI on or before July 31, 2022.

Extension of tenure of AIF beyond 2 years for LVFs

Close ended AIFs are permitted to extend its tenure up to 2 years with the approval of 2/3rd of its unit holders by value of their investment in the said AIF. LVFs are exempt from this requirement whereby LVFs are permitted to extend its tenure beyond 2 years, subject to terms of the contribution agreement, other fund documents and such conditions as may be specified by SEBI from time to time.

In this regard, the following conditions have been prescribed:

Terms and conditions for extension to be laid down in relevant fund documents: The placement memorandum, contribution agreement or other fund documents of LVF shall lay down terms and conditions for extension of the tenure beyond 2 years to enable the investors to take an informed decision.
Approval required from trustee/board of directors/designated partners: LVF shall be required to obtain approval from its trustee/board of directors/designated partners (depending upon the legal structure of the LVF) for extending the tenure beyond 2 years, at least 1 month before expiration of the fund tenure or extended tenure.
Liquidation and winding up of LVF if requisite conditions are not fulfilled: If the requisite conditions specified in the placement memorandum, contribution agreement or other fund documents of LVF for extension of tenure beyond 2 years are not fulfilled, LVF shall liquidate and wind up in accordance with AIF Regulations and circulars issued thereunder.

2. Requirement of Compliance Officer for Managers of all AIFs
All AIFs are now required to ensure that the manager to the AIF designates an employee or director as “compliance officer” who shall be a person other than CEO of the manager (or such equivalent role or position depending on the legal structure of manager). The compliance officer shall be responsible for monitoring compliance with the provisions of the AIF Regulations and circulars issued thereunder.

The above guidelines have been issued vide SEBI circular dated June 24, 2022 (available here).

B. Amendment to Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016
Rule 4 of the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 (Removal of Names Rules) inter alia provides that an application for the removal of the name of a company shall be made in Form STK-2 with the Registrar of Companies (ROC) along with documents as specified under Rule 4. Vide the Companies (Removal of Names of Companies from the Register of Companies) Amendment Rules, 2022 (Amendment Rules), the following new clauses have been added:

Re-submission of defective/ incomplete application for removal of name: If the ROC, on examination of the application made in Form STK-2, requires further information or finds that such application or any document annexed therewith is defective or incomplete in any respect, the ROC will inform the applicant to remove the defects and re-submit the complete form within 15 days from the date of such information, failing which the ROC will treat the form as invalid in the electronic record, and will inform the applicant, accordingly. Even after re-submission of the form, if the ROC finds that the form/any document is defective or incomplete, another period of 15 days will be accorded to the applicant to remove the defect or complete the form, failing which the ROC will treat the form as invalid in the electronic record and shall inform the applicant, accordingly
Prior re-submissions not included: Any re-submission of the application in Form STK-2 made prior to the commencement of the Amendment Rules will not be counted for the purposes of reckoning the maximum number of re-submissions of such form.
Changes to Forms STK-1, STK-5 and STK-5A: If the subscribers to the memorandum have not paid the subscription which they had undertaken to pay at the time of incorporation of a company and a declaration to this effect has not been filed within 180 days of its incorporation, the ROC can strike off such company’s name under Section 248 of Companies Act, 2013. This language has been inserted in Forms STK-1 (Notice by Registrar for removal of name of a company from the register of companies), STK-5 (Public Notice) and STK-5A (Public Notice) as one of the reasons for removal/ strike off of the name of the company.

The above changes have been introduced vide the Companies (Removal of Names of Companies from the Register of Companies) Amendment Rules, 2022 dated June 9, 2022 (available here).

We trust you will find this an interesting read. For any queries or comments on this update, please feel free to contact us at insights@elp-in.com or write to our authors:
Manendra Singh, Associate Partner –ManendraSingh@elp-in.com ;
Tanvi Goyal, Principal Associate –TanviGoyal@elp-in.com;
Aditi Ladha, Associate- AditiLadhai@elp-in.com

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.

Various changes by SEBI & MCA

Jun 29, 2022