SEBI Notifies Second Amendment to AIF Regulations, 2025: Introduction of Co-Investment Schemes
The Security and Exchange Board of India (Alternative Investment Funds) (Second Amendment) Regulations, 2025 recently shared a notification dated September 8, 2025 in powers given by Section 30 (1) read with Section 11 (1) and clauses (ba) and (c) of Section 11 (2) and Section 12 (1) (1B) of Section 12 of the Securities and Exchange Board of India Act, 1992 (15).
The board makes the following regulations to further change the Security and Exchange Board of India (Alternative Investment Funds) Regulation 2012:
- These Regulations will be known as the Securities and Exchange Board of India (Alternative Investment Funds) (Second Amendment) Regulations, 2025.
- They will come into effect on the date of their publication in the Official Gazette.
- In the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012-
I. In sub-regulation (1) of regulation 2,
i) clause (fa) will be replaced with the following:
“(fa) “Co-investment” means investment made by a Manager or Sponsor or investor of a Category I or II Alternative Investment Fund in unlisted securities of investee companies where such a Category I or Category II Alternative Investment Fund makes an investment;”
ii) after clause (fa), the following clause will be placed-
“(fb) “Co-investment scheme” means a scheme of a Category I or Category II Alternative Investment Fund, which facilitates co-investment to investors of a particular scheme of an Alternative Investment Fund, in unlisted securities of an investee company where the scheme of the Alternative Investment Fund is making an investment or has made an investment.”
iii) after clause (r), the following clause will be placed –
“(ra)” Shelf placement memorandum” means a placement memorandum filed by an Alternative Investment Fund for launching co-investment schemes”;
iv) in clause (z), the words and symbols “an angel fund as defined under Chapter III-A and” will be replaced with the word “a”.
II. In regulation 3, in sub-regulation (4), in clause (a), after the words and symbols “SME Funds”, the words and symbols “angel funds” will be placed.
III. In sub-regulation (1) of regulation 15, clause (b) will be removed.
IV. After regulation 17 and before regulation 18, the following regulation will be placed:
“Conditions for co-investment by Category I and II Alternative Investment Funds.
17A. (1) Co-investment by investors of Category I or Category II Alternative Investment Funding will be through a co-investment scheme launched under these regulations or through a Co-investment Portfolio Manager as specified under the Securities and Exchange Board of India (Portfolio Managers) Regulations, 2020.
(2) A shelf placement memorandum will be filed with the Board, in the manner as may be specified by the Board from time to time, through a merchant banker, along with the fee as specified in the Second Schedule to these regulations, prior to the co-investment opportunity being offered to the investors of Category I or Category II Alternative Investment Fund, through a co-investment scheme.
(3) A separate co-investment scheme will be introduced for each co-investment, in accordance with the shelf placement memorandum filed with the Board: Provided that an Angel fund will not launch a co-investment scheme.
(4) Only accredited investors of the Category I or Category II Alternative Investment Fund will be eligible to invest in a co-investment scheme.
(5) Each co-investment scheme will invest in only one investee company.
(6) A co-investment scheme will not invest in units of Alternative Investment Funds.
(7) Co-investment through a co-investment scheme will be carried out in the manner and subject to the conditions as may be specified by the Board from time to time.
(8) The terms of co-investment in an investee company by a Manager or Sponsor or co-investor or a co-investment scheme will not be more favorable than the terms of investment of the Alternative Investment Fund: Provided that the timing of exit from the co-investment in an investee company will be identical to the exit of the scheme of the Alternative Investment Fund from the investment in the investee company.
(9) The co-investment scheme will be wound up on exit from the co-investment in terms of these regulations.
(10) The requirements under clauses (b) and (d) of regulation 10, sub-regulation (2) of regulation 11, sub-regulations (2), (3), (4) and (5) of regulation 12, regulation 13, clauses (a), (c), (da), (g) and (h) of sub-regulation (1) of regulation 15, regulation 16 and regulation 17 will not apply to a co-investment scheme of an Alternative Investment Fund.”
For complete information, refer to the notification: