Sebi Proposes Easing Exit Norms for AIFs, Allowing Fund Retention Beyond Scheme Life

• Sebi proposes allowing Alternative Investment Funds (AIFs) to retain limited funds beyond their scheme life to simplify the winding-up process and facilitate registration surrender.
• The regulator suggests AIFs with no retained funds after scheme expiry could seek 'inoperative' status, subject to compliance.
• The move aims to provide a clear, predictable, and efficient regulatory framework for AIFs discontinuing activities.
• AIFs often need to retain funds for residual operational expenses like legal costs, RTA payments, and audit reports, which are difficult to achieve a nil balance for by fund life end.
• Sebi also proposes an 'inoperative funds' classification for AIFs with no active investment but potential future inflows from litigation or tax matters, requiring proportionate regulatory compliance.