Sebi proposes framework for AIFs to strengthen corporate governance rules

To strengthen corporate governance mechanism, capital markets regulator Sebi on Thursday proposed to amend the current rules governing alternative investment funds (AIFs). Under the proposal, Category I and Category II AIFs should not borrow funds directly or indirectly or engage in leverage for the purpose of making investments, Sebi said in its consultation paper. These AIFs can borrow for the purpose of meeting shortfall in drawdown while making investment in an investee company, subject to certain conditions. Among the conditions included that such borrowing by these AIFs should be done only in case of emergency and as a last recourse, the amount borrowed should not exceed 10 per cent of the investment proposed to be made in the investee company and the cost of such borrowing should be charged only to such investor who delayed or defaulted on drawdown payment. Category I and Category II AIFs should maintain 30 days cooling off period between two periods of permissible ...

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