The Securities and Exchange Board of India on 24th January 2022 has published the Securities and Exchange Board of India (Alternative Investment Funds) (Amendment) Regulations, 2022 through which it has introduced special situation funds for investment in stressed assets.
As per the amendment, a new chapter III-B has been notified on Special Situation Funds which shall be applicable to special situation funds and schemes launched by such special situation funds.
The “special situation asset” includes,-
(a) stressed loan available for acquisition in terms of Clause 58 of Master Direction – Reserve Bank of India (Transfer of Loan Exposures) Directions, 2021 as amended from time to time or as part of a resolution plan approved under the Insolvency and Bankruptcy Code, 2016 or in terms of any other policy of the Reserve Bank of India or Government of India issued in this regard from time to time;
(b) security receipts issued by an Asset Reconstruction Company registered with the Reserve Bank of India;
(c) securities of investee companies
(d) Any other asset as may be specified by the Board from time to time;
Further the term “special situation fund” means a Category 1 Alternative Investment Fund that invests in special situation assets in accordance with its investment objectives and may act as a resolution applicant under the Insolvency and Bankruptcy Code, 2016.
The Special situation funds shall invest only in special situation assets and may act as a resolution applicant under the Insolvency and Bankruptcy Code, 2016:
Provided that the special situation fund shall not invest in,
- its associates; or
- the units of any other Alternative Investment Fund other than the units of a special situation fund; or
- units of special situation funds managed or sponsored by its manager, sponsor or associates of its manager or sponsor.
