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JC - Legal Updates - SEBI approves sub-category of funds to invest in stressed assets

Legal Updates

04 Jan 2022

SEBI approves sub-category of funds to invest in stressed assets

A new category under Category I Alternative Investment Funds (“AIFs”) i.e. Special Situation Funds (“SSF”) is proposed to be introduced to permit such funds to invest in stressed assets. Following are some of the key features proposed to be introduced:

(a)      Minimum Corpus of an SSF:  INR 100 crores;

(b)      Minimum investment: INR 10 crores for an investor and INR 5 crores for an accredited investor;

(c)      Investment Relaxations: SSF shall be exempt from the conditions of investment concentration in a specific investee and also shall not be restricted to invest either only in listed or unlisted securities of investee company; and

(d)      Due Diligence requirement: The SSF shall be subject to the initial and continuous due diligence being conducted as similar to the requirements applicable to investors of Asset Reconstruction Company (“ARC”).

For the purpose of SSF, stressed assets shall mean:

(a)      Stressed loans available for acquisitions in terms of the guidelines prescribed by Reserve Bank of India;

(b)      Security receipts issued by ARCs;

(c)      Securities issued by companies in distress; and

(d)      Such other security prescribed by SEBI

The above proposal has been approved by the Securities and Exchange Board of India board in its meeting held on 28th December 2021.

SEBI | SEBI Board Meeting

For any further information, please contact Ms. Apurva Kanvinde (apurva.kanvinde@jclex.com) or Mr. Sumitava Basu (sumitava.basu@jclex.com).