SEBI Recasts AIF Wind-Up Discipline With Conditional Retention Framework

SEBI’s decision to permit Alternative Investment Funds to retain liquidation proceeds beyond fund tenure in select cases, including demonstrable tax, regulatory, litigation, or residual liability scenarios, materially relaxes the rigidity of the existing wind-up regime, while the proposed recognition of “inoperative funds” with lighter compliance requirements addresses the practical deadlock faced by funds that have substantially exited investments but remain procedurally alive pending closure contingencies, thereby advancing a more functional end-of-life regulatory architecture that balances investor protection, operational realism, and compliance efficiency within India’s alternative capital framework.