SEBI vide circular dated April 10, 2023 has issued guidelines with respect to excusing or excluding an investor from an investment of AIF. An AIF may excuse its investor from participating in a particular investment in the following circumstances:
- If the investor, based on the opinion of a legal professional/legal advisor, confirms that its participation in the investment opportunity would be in violation of an applicable law or regulation;
- If the investor, as part of contribution agreement or any other agreement signed with the AIF, had disclosed to the manager that, participation of the investor in such investment opportunity would bein contravention to the internal policy of the investor.
- Manager shall ensure that terms of such agreement with the investor include reporting of any change in the disclosed internal policy, to the AIF, within 15 days of such change.
Further, an AIF may exclude an investor from participating in a particular investment
opportunity, if the manager of the AIF is satisfied that the participation of such investor
in the investment opportunity would lead to the scheme of the AIF being in violation of
applicable law or regulation or would result in material adverse effect on the scheme
of the AIF. The manager shall record the rationale for such exclusion, along with the
documents relied upon, if any.
If the investor of an AIF is also an AIF or any other investment vehicle, such investor
may be partially excused or excluded from participation in an investment opportunity,
to the extent of the contribution of the said fund/investment vehicle’s underlying
investors who are to be excused or excluded from such investment opportunity. The
manager of AIF shall record the rationale for such excuse or exclusion along with the
supporting documents, if any.