A Threshold Limit of 25% u/r 15(1)(c) of AIF Norms Shall Apply at Level of Individual Target Co. Acquired by ARC Trust | SEBI

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AIF Norms

Informal Guidance No. SEBI/HO/AFD/PoD/OW/2023/49070, Dated: 12.12.2023

Mangalkari Asset Investment AIF registered with SEBI sought informal guidance as to whether a threshold limit of 25% in an Investee Co. under regulation 15(1)(c) of AIF Regulations shall apply at the level of individual target co. acquired by ARC Trust or it will be at the level of individual ARC Trust regardless of multiple target company loan accounts it may hold.

Regulation 15 of the AIF Regulations, 2012 specifies the investment conditions for all categories of AIFs. As per Regulation 15(1)(c), Category I and II of Alternative Investment Funds shall not invest more than 25% of the investable funds in an investee company, either directly or through investment in units of other AIFs.

The clause ‘or through investment in units of other AIF’ in Regulation 15(1)(c) indicates that investment in an investee company by the AIF directly and through investment in units of other AIFs, is to be considered in the calculation of concentration limit.

In response, SEBI clarified that the threshold limit shall apply at the level of individual target company acquired by the ARC Trust in addition to investments made by AIFs directly in the target company.

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