SEBI has released a draft circular proposing operational clarifications for implementing the pro-rata rights framework under Regulation 20(21) of the SEBI (AIF) Regulations, 2012 (as amended on November 18, 2024), further detailed in the circular dated December 13, 2024. The draft addresses industry feedback on how pro-rata rights should apply to capital drawdowns and distributions. ๐๐๐ฒ ๐๐ฅ๐๐ซ๐ข๐๐ข๐๐๐ญ๐ข๐จ๐ง๐ฌ ๐๐ซ๐จ๐ฉ๐จ๐ฌ๐๐:
1. ๐๐ซ๐๐ฐ๐๐จ๐ฐ๐ง ๐๐๐ฌ๐ข๐ฌ: Pro-rata capital calls may be made based on total commitment or undrawn commitment (net of drawn amounts). The chosen basis must be disclosed upfront in the PPM and cannot be changed once the scheme is launched.
2. ๐๐ง๐ฎ๐ญ๐ข๐ฅ๐ข๐ฌ๐๐ ๐๐จ๐ฆ๐ฆ๐ข๐ญ๐ฆ๐๐ง๐ญ ๐ข๐ง ๐๐ฑ๐๐ฎ๐ฌ๐/๐๐ฑ๐๐ฅ๐ฎ๐ฌ๐ข๐จ๐ง ๐๐๐ฌ๐๐ฌ: If drawdowns are based on total commitment and an investor is excused from an investment, the unutilised portion cannot be used for later drawdowns. This must be disclosed to investors.
3. ๐๐ซ๐๐๐ญ๐ฆ๐๐ง๐ญ ๐จ๐ ๐๐ฑ๐ข๐ฌ๐ญ๐ข๐ง๐ ๐๐๐ก๐๐ฆ๐๐ฌ: Schemes already using one of the permitted drawdown methods may continue. Schemes using any other method must align prospectively. Such alignment will not be treated as a material change and investors may choose whether to continue contributing.
4. ๐๐ฉ๐๐ง-๐๐ง๐๐๐ ๐๐๐ญ๐๐ ๐จ๐ซ๐ฒ ๐๐๐ ๐๐๐ ๐ฌ: Units will continue to be issued and redeemed at NAV and distributions made pro-rata to units held. However, if the scheme primarily invests in unlisted securities, the pro-rata drawdown framework also applies.
5. ๐๐ฑ๐ข๐ฌ๐ญ๐ข๐ง๐ ๐๐ซ๐ข๐จ๐ซ๐ข๐ญ๐ฒ ๐๐ข๐ฌ๐ญ๐ซ๐ข๐๐ฎ๐ญ๐ข๐จ๐ง ๐๐ญ๐ซ๐ฎ๐๐ญ๐ฎ๐ซ๐๐ฌ: For investments made on or before December 13, 2024, distribution may continue as per the waterfall disclosed in the PPM and other fund documents.
6. ๐๐๐ซ๐ซ๐ข๐๐ ๐๐ง๐ญ๐๐ซ๐๐ฌ๐ญ: Sharing of returns or additional profit (carried interest) with the manager or sponsor is excluded from the pro-rata requirement to that extent, based on the contribution agreement.
7. ๐๐จ๐ฆ๐ฆ๐ข๐ญ๐ฆ๐๐ง๐ญ ๐ญ๐จ ๐๐ ๐๐๐๐จ๐ซ๐๐๐ ๐ข๐ง ๐๐๐: Investor commitments must be recorded in INR for determining corpus and calculating pro-rata rights.
This draft moves the framework from principle to practical application, affecting fund drawdown models, investor communication and distribution mechanics. It enhances clarity for both managers and investors on how rights align with committed capital. Public comments are open until November 28, 2025.
A copy of the Consultation Paper is attached.
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