AIF Registration with SEBI: Category I, II, III, Corpus Requirements & Form A

What is an Alternative Investment Fund (AIF)?

An Alternative Investment Fund is a privately pooled investment vehicle regulated under SEBI (Alternative Investment Funds) Regulations, 2012, as amended. AIFs invest in non-traditional assets such as unlisted equity, real estate, infrastructure, startups, and distressed assets. They are closed-ended structures and are not open to the public.

SEBI oversees AIF registration, governance, and operational compliance. Fund managers must register with SEBI before launching an AIF and accepting investor capital.

The Three AIF Categories: Key Differences

Category I: Venture Capital & Social Impact

Category I AIFs invest primarily in:

• Unlisted equity or equity-linked instruments of startups and early-stage companies


• Social enterprises and infrastructure projects benefiting public


• Asset reconstruction and distressed asset recovery


• Renewable energy and green infrastructure

Key Features:

• Lower regulatory burden and faster approvals


• Tax incentives available to investors under Section 54EC or other provisions


• Flexible valuation norms


• Fund life: typically 7-10 years with extensions


• Minimum Fund Size: Rs.25 crore for Category I (though effective corpus is lower; see corpus threshold below)

Category II: Private Equity & Debt Funds

Category II AIFs invest in:

• Unlisted equity and debt instruments


• Private credit and structured debt


• M&A-backed buyouts and growth equity


• Real estate and infrastructure debt

Key Features:

• Moderately regulated; balanced investor protection


• No specific tax benefits at investor level


• Professional fund manager oversight


• Minimum Fund Size: Rs.25 crore


• Longer fund tenures (7-12 years typical)


• Higher leverage permitted compared to Category I

Category III: Unregulated & Complex Strategies

Category III AIFs include:

• Hedge funds with complex strategies (long-short equity, derivatives, arbitrage)


• Funds using significant leverage and derivatives


• Commodity trading and volatility funds


• Credit-focused funds with extended strategies

Key Features:

• Stringent eligibility criteria for investors (minimum investable surplus of Rs.1 crore or higher)


• Highest regulatory scrutiny and compliance burden


• Advanced risk management and valuation frameworks required


• Minimum Fund Size: Rs.25 crore


• Sophisticated investor base only (financial institutions, HNIs, corporates)

The Rs.20 Crore Minimum Corpus Requirement

Under SEBI (AIF) Regulations, 2012, the minimum corpus requirement is Rs.20 crore (or equivalent in foreign currency for international AIFs). This is the threshold that:

• Triggers formal SEBI registration: Fund managers must apply for SEBI registration once the fund raises or commits to raise Rs.20 crore in capital.
• Applies equally to all three categories: Whether Category I, II, or III, the Rs.20 crore floor is non-negotiable.
• Includes committed capital, not just deployed: If investors have committed Rs.20 crore (even if not fully called), the fund is deemed to have crossed the threshold.
• Exception for smaller funds: Funds below Rs.20 crore may operate without SEBI registration as unregistered AIFs, but they face restrictions on investor solicitation and governance flexibility.

In practice, most AIFs aim for Rs.25 crore or higher at inception to ensure buffer above the minimum.

Form A: AIF Registration Application Requirements

Form A is the mandatory SEBI application for AIF registration. It must be filed online via the SEBI portal (sebi.gov.in) and includes:

Essential Documents & Information:

• Fund Structure & Documents

• Fund Manager Details

• Investor Base & Terms

• Risk Management & Compliance

• Statutory Declarations

Filing Process:

• Pre-registration: Prepare all documents and ensure compliance with SEBI guidelines.
• Online submission: File Form A through SEBI's online portal with supporting attachments.
• SEBI scrutiny: SEBI typically reviews within 30-45 days and may seek clarifications (CA calls).
• Final approval: Upon satisfactory review, SEBI issues the AIF Registration Certificate.

Critical Compliance Checkpoints

• Fund Manager eligibility: Net worth and experience requirements vary by category. Category III fund managers face the strictest criteria.
• Custodian appointment: Mandatory appointment of a custodian for fund assets (RTA or bank custodian).
• Annual reporting: Audited financials, annual reports, and performance statements to SEBI and investors within prescribed timelines.
• Valuation of investments: Illiquid assets must be independently valued at least annually (more frequently for Category III).
• Leverage limits: Category I & II have lower leverage thresholds; Category III allows higher leverage with stricter controls.

Common Pitfalls in AIF Registration

• Filing incomplete Form A or missing supporting certifications
• Failing to meet the Rs.20 crore corpus before investor solicitation
• Inadequate valuation or risk management policies for illiquid holdings
• Appointing unqualified or conflicted custodians
• Misrepresenting fund category or strategy post-registration

Why Professional Guidance Matters

AIF registration is not a commodity compliance task. The Form A submission, corpus documentation, valuation frameworks, and ongoing regulatory alignment require deep knowledge of SEBI precedent, fund law, and investor documentation. A misstep in category classification or valuation methodology can trigger SEBI enforcement action, investor disputes, or fund suspension.

I'm CA Harun Raaj, Visakhapatnam. If you're setting up an AIF or need to review your registration compliance, reach out to discuss your fund structure and registration roadmap.

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