SEBI Board Approval: CIVs and Advisory (June 18, 2025)
Applicability: Category I & II AIFs and their managers, and accredited investors in those funds.
Background: This followed the May 2025 consultation. Based on stakeholder support, SEBI’s June 18, 2025 Board meeting finalized rules for co-investment within the AIF structure. The Board also addressed portfolio manager issues by repealing the prohibition on AIF managers advising on listed securities in co-investment transactions.
Summary: SEBI formally approved a “Co-Investment Vehicle” (CIV) framework. Under it, an AIF may launch one or more dedicated CIV schemes (Category I or II) for each co-investment opportunity in an unlisted portfolio company. Conditions include filing a CIV shelf PPM with SEBI (either at initial registration or later). The CIV scheme must be offered only to accredited investors and have separate bank/Demat/PAN accounts. Separately, AIF managers are now expressly allowed to advise on listed securities within the co-investment context.
Key Update: Effective immediately (board decision June 18, 2025): AIF managers may offer co-investment via CIVs subject to conditions. Specifically, each CIV is a scheme of the AIF for investing alongside one of its unlisted portfolio companies. A “shelf” PPM for CIV schemes can be filed upfront, streamlining future co-investments. Additionally, the prior ban on AIF managers providing advice on listed co-investments has been lifted (subject to conflict-of-interest safeguards).
Important Dates: Board approval on June 18, 2025. The changes were announced the same day.
Effective Date: Immediately from the Board decision (June 18, 2025) – existing AIFs were given the option to comply (e.g. file shelf PPM) without fresh registration.
What Remains Unchanged: Only accredited investors can participate in CIV schemes. Co-investments still require due diligence and disclosure through the AIF regime. Other AIF regulations (custody, valuation, etc.) continue to apply to the CIV scheme as a separate fund. Category III funds remain outside this regime.
Why This Matters: The new CIV structure simplifies co-investment: separate schemes and accounts ensure transparency and separation of funds. It also avoids duplicate regulatory filings (via the shelf PPM) and aligns India’s rules with global private equity practice. Allowing advisory on listed securities resolves a practical obstacle noted by managers. Overall, this “landmark reform” is intended to deepen investor participation in unlisted markets and reduce compliance burden.
SEBI’s Statement: In a press release, SEBI said the move was aimed at “enhancing ease of doing business” in AIFs. It explicitly noted that permitting CIV schemes “will further facilitate AIFs and investors to co-invest and will support capital formation in unlisted companies through AIFs”. For example, the SEBI statement reads: “the Board approved the proposal to permit Category I & II AIFs to offer Co-investment scheme (CIV scheme) under SEBI (AIF) Regulations, 2012. This will further facilitate AIFs and investors to co-invest…”.