SEBI Relaxes Dematerialisation Mandates For AIFs

SEBI Relaxes Dematerialisation Mandates For AIFs

SUMMARY

Markets watchdog Securities and Exchange Board of India (SEBI) has now announced some relaxation in the deadlines for alternative investment funds (AIFs)

SEBI said that any investment made by an AIF on or after July 01, 2025, shall be held in dematerialised form only

Further, SEBI noted investments made before July 1, 2025 will be exempt from this requirement, barring certain exceptions

Markets watchdog Securities and Exchange Board of India (SEBI) has now relaxed its mandates for alternative investment funds (AIFs) to hold their investments in dematerialised form.

“Any investment made by an  AIF on or after July 01, 2025, shall be held in dematerialised form only, irrespective of whether the investment is made directly in the investee company or is acquired from another entity,” SEBI said in a circular. 

Dematerialisation essentially means transforming the physical shares and securities into digital or electronic form to ensure safety, convenience and efficiency. Notably, AIF is a privately pooled investment vehicle that collects funds from investors under a defined investment policy. The funds are infused as capital for the benefit of its investors.

Further, SEBI noted investments made before July 1, 2025, will be exempt from this requirement, barring certain caveats. 

These exceptions will not be available if the investee company of the AIF is legally mandated to dematerialise its securities. 

Additionally, exemptions will also not be available if the AIF, either independently or alongside other SEBI-registered entities that are required to hold investments in demat form, exercises control over the investee company. In both these cases, SEBI said the investments must be dematerialised by October 31, 2025.

Further, some schemes are exempt from this requirement altogether. These include the ones whose tenure ends by October 31, 2025, or those already in an extended tenure as of February 14, 2025. 

The new provisions are effective immediately and have been brought in by SEBI with an eye on promoting investor protection and improving market transparency. 

This follows SEBI, in June 2023, issuing a circular that directed AIFs, with a corpus of INR 500 Cr and above, to dematerialise their units by October 31, 2023. Other AIFs, with a corpus less than INR 500 Cr, have to dematerialise their units by April 30, 2024. 

In the recent past, SEBI has made or proposed multiple changes to AIF and venture capital fund (VCF) norms. 

For instance, In September 2023, SEBI updated valuation rules for AIF portfolios, aligning most securities with mutual fund regulations (SEBI Mutual Funds Regulations, 1996), except for unlisted, non-traded, or thinly traded securities.

In August 2024, SEBI allowed Category-I and II AIFs to borrow for up to 30 days to meet temporary needs and operations. At the time, borrowing was limited to four times a year and capped at 10% of total investible funds.

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.

You have reached your limit of free stories
This Holi, Paint Your Startup Journey
with Innovation & Intelligence!

Join The Community Trusted By India’s Top 1% Startup Founders, Investors & Operators and stay ahead in India’s startup & business economy.

Holi Offer Ending In
countdownmail.com
2 YEAR PLAN
₹19999
₹6499
₹270/Month
UNLOCK 68% OFF
Cancel Anytime
1 YEAR PLAN
₹9999
₹3499
₹291/Month
UNLOCK 65% OFF
Cancel Anytime
Already A Member?
Discover Startups & Business Models

Unleash your potential by exploring unlimited articles, trackers, and playbooks. Identify the hottest startup deals, supercharge your innovation projects, and stay updated with expert curation.

SEBI Relaxes Dematerialisation Mandates For AIFs-Inc42 Media
How-To’s on Starting & Scaling Up

Empower yourself with comprehensive playbooks, expert analysis, and invaluable insights. Learn to validate ideas, acquire customers, secure funding, and navigate the journey to startup success.

SEBI Relaxes Dematerialisation Mandates For AIFs-Inc42 Media
Identify Trends & New Markets

Access 75+ in-depth reports on frontier industries. Gain exclusive market intelligence, understand market landscapes, and decode emerging trends to make informed decisions.

SEBI Relaxes Dematerialisation Mandates For AIFs-Inc42 Media
Track & Decode the Investment Landscape

Stay ahead with startup and funding trackers. Analyse investment strategies, profile successful investors, and keep track of upcoming funds, accelerators, and more.

SEBI Relaxes Dematerialisation Mandates For AIFs-Inc42 Media
SEBI Relaxes Dematerialisation Mandates For AIFs-Inc42 Media
You’re in Good company