AIF & SEBI Lifecycle · Step 2 of 4
AIF PPM & LPA Drafting
Private Placement Memorandum (PPM) and Contribution Agreement drafting for SEBI-registered AIFs — all three categories. Must be filed with SEBI at least 30 days before any capital is raised (Regulation 11, SEBI AIF Regulations 2012). We draft in line with the SEBI Master Circular dated 07/05/2024 and the SEBI (AIF) Third Amendment Regulations, 2025.
More details are coming soon. Contact us to get started.
Why the PPM Is the Most Consequential AIF Document
Under Regulation 11 of the SEBI (AIF) Regulations, 2012, the PPM must be filed with SEBI at least 30 days before a single rupee is raised from any investor. It governs the relationship between the fund, the investment manager, the trustee, and every investor across the entire scheme life — from first close to final distribution. Fund managers who treat the PPM as a checkbox rather than a foundational operating document create compliance and contractual problems that surface during SEBI inspections, investor disputes, and exit documentation.
Critical Timelines
PPM filing deadline
30 days before scheme launch (Regulation 11)
First close deadline
12 months from SEBI taking PPM on record
Minimum corpus — Cat I (excl. Angel Fund)
₹20 crore
Minimum corpus — Angel Fund
₹10 crore (Chapter III-A)
Minimum corpus — Cat II and III
₹20 crore
Single-investee concentration (Cat I/II)
Max 25% of investable funds (Regulation 15)
Continuing interest — Cat I & II
2.5% of corpus or ₹5 Cr (lower of) (Regulation 10(d))
Continuing interest — Cat III
5% of corpus or ₹10 Cr (lower of) (Regulation 10(d))
Annual PPM audit submission
Within 6 months of FY-end (Regulation 29)
Merchant banker due diligence certificate
Required under Annexure 3 of SEBI Master Circular
What We Draft — Section by Section
We follow the SEBI-mandated PPM template (Annexure 1 and 2 of the SEBI Master Circular No. SEBI/HO/AFD-1/AFD-1-PoD/P/CIR/2024/39 dated 07/05/2024).
- Executive summary and fund overview — scheme name, category, strategy, and investment horizon
- Investment strategy and mandate — sector focus, stage, geography, target returns, and exclusions
- Fund structure and key parties — manager, sponsor, trustee, investment committee, and LPAC composition
- Sponsor commitment and skin-in-the-game — continuing interest quantum, form, and timeline
- Fee structure — management fee, setup fee, transaction fee, and clawback provisions
- Distribution waterfall — preferred return (hurdle rate), catch-up, and carried interest split
- Risk factors — regulatory, market, liquidity, concentration, foreign exchange, and key-man risk
- Offshore investments and FEMA limits — permissible jurisdictions and RBI approval requirements under Regulation 15
- Governance — Investment Committee composition, quorum, voting, and conflict of interest protocols
- LPAC (Limited Partner Advisory Committee) — composition, powers, and consent thresholds
- Key person clause and manager removal — trigger events and removal process
- Pari passu, pro-rata rights, and side-letter disclosures — equal treatment framework
- Disciplinary history and pending litigation of the Manager and key personnel
- Investor grievance mechanism and complaint disclosure (Regulations 20(21) and 20(22))
- GIFT City/IFSCA differences (where applicable) — USD thresholds, IFSCA template, FME obligations
2025 & 2026 Changes We Build In
- SEBI (AIF) Third Amendment Regulations, 2025 (notified 18/11/2025) — structural changes to Cat I/II/III classification and reporting
- SEBI Circular dated 08/12/2025 — AI-only fund migration framework and LVF (Large Value Fund) PPM exemptions
- IFSCA (Fund Management) Regulations, 2025 — updated GIFT City framework replacing 2022 regulations
- SEBI Master Circular SEBI/HO/AFD/AFD-POD-1/P/CIR/2024/175 dated 13/12/2024 — valuation and reporting updates
- SEBI Circular on Cyber Security and Cyber Resilience Framework (CSCRF) dated 20 August 2024 — cybersecurity obligations at PPM-disclosure level
Common Mistakes We Prevent
- PPM filed less than 30 days before fundraising — triggers SEBI non-compliance notice
- First close not declared within 12 months of SEBI taking PPM on record
- Continuing interest stated as a percentage but the lower absolute cap (₹5 Cr or ₹10 Cr) is not disclosed
- Distribution waterfall mismatch between the PPM and the Contribution Agreement signed with investors
- Investment Committee composition does not meet independence criteria under SEBI Master Circular
- Key person clause triggers undefined — what constitutes departure, replacement timeline ambiguous
- Investor grievance mechanism not compliant with Regulations 20(21) and 20(22)
- GIFT City PPM drafted without adapting to IFSCA template requirements and USD denominators
- Material changes made post-filing without SEBI notification — the 2024 SEBI circular requires event-based filing within prescribed timelines
Frequently Asked Questions
What is the legal basis for PPM filing with SEBI?
Regulation 11 of the SEBI (Alternative Investment Funds) Regulations, 2012 requires every AIF to file a Private Placement Memorandum with SEBI before making any invitation to subscribe. The PPM must comply with the format prescribed in Annexure 1 (for funds other than Angel Funds) and Annexure 2 (for Angel Funds) of the SEBI Master Circular No. SEBI/HO/AFD-1/AFD-1-PoD/P/CIR/2024/39 dated 07/05/2024.
Can the PPM be amended after SEBI filing?
Yes, but material changes require SEBI notification before implementation. Regulation 20(13) and the SEBI Master Circular specify the categories of material change and the event-based filing obligations triggered by each. Non-material changes must be disclosed to investors at the next annual general meeting or via the annual report.
What is the annual PPM audit and who conducts it?
Regulation 29 of the SEBI (AIF) Regulations, 2012 requires every AIF to appoint a Chartered Accountant to conduct an annual audit of the PPM and fund operations — verifying that the fund has operated within the strategy, limits, fees, and governance framework disclosed in the PPM. The audit report must be submitted to SEBI within 6 months of the financial year-end.
Is a separate PPM required for each scheme of an AIF?
Yes. Each scheme launched under an AIF must have its own PPM filed with SEBI. The registration fee for each additional scheme is ₹1,00,000 (separate from the initial registration fee). Each scheme is treated as a distinct fundraise with its own investor list, capital commitment, and PPM.
What is the carry structure and where is it documented in the PPM?
The carry (carried interest) is the performance fee paid to the investment manager or sponsor, typically 15–20% of profits above the hurdle rate. It is documented in the Distribution Waterfall section of the PPM, which specifies: (1) preferred return threshold, (2) catch-up clause, (3) carry split between manager and sponsor, and (4) clawback provisions on over-distributed carry. The Contribution Agreement (signed with each investor) must mirror these terms exactly.
What is different about a GIFT City IFSCA PPM compared to a SEBI PPM?
IFSCA-registered funds in GIFT City use a different PPM template under the IFSCA (Fund Management) Regulations 2025 (replacing the 2022 version). Key differences: USD-denominated thresholds (minimum corpus USD 3M, investor commitment USD 1,50,000), IFSCA as the regulatory signatory (not SEBI), different FME disclosure requirements, and IFSCA-specific risk disclosures for non-resident investors. A fund operating both a domestic SEBI AIF and a GIFT City IFSCA scheme requires two separate PPMs.
What Comes Next
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PPM drafting is part of the AIF registration process. If you are starting from scratch — entity structuring, SEBI Form A, PPM, and registration — we handle the full lifecycle in a single engagement.
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AIF Ongoing Compliance & Reporting
The annual PPM audit under Regulation 29 must be submitted within 6 months of financial year-end. Material changes to the PPM after SEBI filing are event-based filings. We handle both as part of the ongoing compliance retainer.
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GIFT City & IFSC Fund Setup
IFSCA funds in GIFT City require a separate PPM under the IFSCA (Fund Management) Regulations 2022 — different template, USD-denominated thresholds, and IFSCA-specific governance requirements. We draft both the SEBI and IFSCA versions.
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