SEBI lets AIFs keep leftover funds, creates 'Inoperative fund' status
The Securities and Exchange Board of India (SEBI) just rolled out new rules for Alternative Investment Funds (AIFs), letting them keep leftover money even after a fund's official end date.
The idea is to help AIFs handle any last-minute legal or tax issues that pop up, instead of rushing to close everything out.
There's also a new "Inoperative Fund" status for funds stuck in limbo due to unresolved problems.
AIFs must provide invoices and reports
AIFs can retain these funds in multiple circumstances, including when they have received official communication indicating a potential tax, regulatory, or legal liability, and just for up to three years beyond the fund's life for residual winding-up-related operational expenses.
They'll need proof—like invoices—for any wind-down costs.
Some funds going "inoperative" may apply while intending to surrender their license, but they still have to send yearly updates about what money is left and what issues remain.
These rules now cover older venture capital funds too, so everyone plays by the same book.