๐ฆ๐๐๐ ๐ต๐ฎ๐ ๐ถ๐ป๐๐ฟ๐ผ๐ฑ๐๐ฐ๐ฒ๐ฑ ๐ฎ ๐๐๐ฟ๐๐ฐ๐๐๐ฟ๐ฒ๐ฑ ๐ณ๐ฟ๐ฎ๐บ๐ฒ๐๐ผ๐ฟ๐ธ ๐ณ๐ผ๐ฟ ๐๐๐๐ ๐๐ต๐ฎ๐ ๐ฎ๐ฟ๐ฒ ๐๐ป๐ฎ๐ฏ๐น๐ฒ ๐๐ผ ๐ฐ๐ผ๐บ๐ฝ๐น๐ฒ๐๐ฒ ๐๐ถ๐ป๐ฑ๐ถ๐ป๐ด ๐๐ฝ ๐๐ถ๐๐ต๐ถ๐ป ๐๐ต๐ฒ๐ถ๐ฟ ๐ฝ๐ฒ๐ฟ๐บ๐ถ๐๐๐ถ๐ฏ๐น๐ฒ ๐ณ๐๐ป๐ฑ ๐น๐ถ๐ณ๐ฒ.
The circular dated June 16, 2026 addresses a practical reality that many AIF managers encounter, i.e., schemes that have concluded their investment activity but cannot be fully wound up due to pending litigation, unresolved tax demands, or residual operational expenses. Until now, there was no dedicated regulatory pathway for such situations.
Under the framework, an AIF may retain liquidation proceeds beyond its permissible fund life if it satisfies at least one of three conditions:
1. Receipt of a demonstrable litigation or tax notice from a court, regulatory authority, tax authority, or counterparty.
2. Investor consent of at least 75% by value for anticipated liabilities, with disclosure of the amount retained and estimated timeline.
3. Documented substantiation of residual winding-up expenses through invoices or comparable historical records, subject to a hard cap of three years.
An AIF satisfying any of the above may apply to SEBI for an โInoperative Fundโ tag. Once tagged, the AIF is exempt from most ongoing compliance obligations, including quarterly and annual activity reports, compliance test reports, custodian requirements, NISM certification, and periodic investor disclosures.
No new schemes may be launched and no management fees may be charged. A single annual status report on retained monies and outstanding liabilities must be submitted to SEBI and investors within 30 days from the end of March each financial year.
The framework also applies to Venture Capital Funds registered under the erstwhile SEBI (Venture Capital Funds) Regulations, 1996.
This circular is effective immediately.
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