The Securities and Exchange Board of India (SEBI) has issued a consultation paper aimed at rationalising the requirement of obtaining investor consent and redefining conflicted transactions under the SEBI (Alternative Investment Funds) Regulations, 2012.
The paper, dated June 30, 2026, seeks to establish uniform processes and thresholds to protect investors while maintaining commercial flexibility.
SEBI aims to standardise the process for obtaining investor consent under AIF regulations, including during conflicted transactions.
The proposals also seek to unify the threshold for unitholder approval across different regulations and redefine conflicted transactions to better align with regulatory intent and protect investors.
The current framework has gaps, with varying approval thresholds for material changes but no clear methodologies for collecting consent. The existing definition of "associate" is narrow, leading to interpretational uncertainty. Divergent market practices have emerged, causing operational complexity and legal disputes.
SEBI proposes three voting methodologies for AIFs: Deemed Consent, Present and Voting, and Express Voting for Approval. Each method has its pros and cons, balancing operational flexibility and investor protection.
SEBI intends to convert cases requiring a simple 2/3 approval into a uniform 75% unitholder consent threshold. This change aims to provide better minority protection by preventing small majorities from carrying dissenting stakeholders along unchecked.
SEBI proposes replacing the term "associate" with "related party" for conflict-of-interest provisions. This change will cover relatives, firm partners, and companies with common directors, among others, to ensure more comprehensive scrutiny of conflicted transactions.
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AIFs must disclose their chosen voting methodology and procedures in their Private Placement Memorandums. Managers must provide detailed information packets when seeking consent and maintain complete records of all vote communications and meetings.
The Securities and Exchange Board of India invites public and stakeholder comments on these proposed regulatory modifications. All feedback must be submitted online latest by July 21, 2026, strictly through the designated web-based form accessible directly via the official SEBI portal.
In the event of encountering technical issues during the online submission process, users can seek assistance by reporting their problems to afdconsultation@sebi.gov.in with a mandatory copy to padmab@sebi.gov.in.
All such emails must clearly state the subject line as "Rationalizing investor consent and conflicted transactions for AIFs".
SEBI's consultation paper proposes standardising investor consent processes and redefining conflicted transactions under AIF regulations. The proposals include three voting methodologies, a uniform 75% approval threshold, and a broader definition of "related party" for conflict-of-interest provisions.
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Disclaimer: This blog has been written exclusively for educational purposes. The securities or companies mentioned are only examples and not recommendations. This does not constitute a personal recommendation or investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.
Mutual Funds Investments are subject to market risks, read all the related documents carefully before investing.
Published on: Jul 1, 2026, 12:57 PM IST
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