Timeline for first close and calculation of tenure of AIFs

Chapter 12 - Timeline for first close and calculation of tenure of AIFs

12.1. Timeline for declaration of First Close of schemes of AIFs (Validity of PPM)

• Under Regulation 12(4) of the AIF Regulations, the first close of an AIF scheme must be declared by the AIF in the manner specified by SEBI.

• The first close marks the point at which the AIF scheme formally completes its initial fundraising stage, subject to the applicable SEBI requirements.

• The AIF must follow the specific conditions and modalities prescribed by SEBI for declaring the first close.

12.1.1.

• The First Close of an AIF scheme must be declared within a maximum period of 12 months.

• The 12-month period starts from the date on which the AIF becomes eligible to launch its scheme.

• The eligibility date is determined in accordance with Paras 2.4.1.1 and 2.5.2.1.1 of the Master Circular.

Example:

• An AIF becomes eligible to launch its scheme on 1 September 2026.

• The AIF must declare the First Close on or before 31 August 2027.

• It cannot keep the scheme open for initial fundraising beyond the prescribed 12-month period without declaring the First Close.

12.1.2.

• For an open-ended scheme of a Category III AIF, the term “First Close” has a specific meaning.

  1. In such schemes, the First Close means the close of the Initial Offer Period.

  2. Therefore, the First Close does not refer to the fund permanently stopping subscriptions.

12.1.3.

• At the time of declaring the First Close, the corpus of the AIF scheme must be at least equal to the minimum corpus prescribed under the AIF Regulations.

  1. The applicable minimum corpus depends on the category or sub-category of the AIF.

  2. Therefore, an AIF cannot declare its First Close unless its scheme has achieved the required minimum corpus.

12.1.4.

• The commitment provided by the Sponsor or Manager at the time of declaring the First Close, to meet the applicable minimum corpus requirement, cannot be changed after the First Close.

• Such commitment cannot be:

  1. Reduced.

  2. Withdrawn.

  3. Transferred.

• after the First Close.

• The purpose is to ensure that the minimum corpus requirement continues to be supported by the Sponsor or Manager's commitment.

Example:

• The minimum corpus required for a scheme is ₹20 crore.

• At the time of First Close, the scheme has:

  1. Investor contributions: ₹15 crore

  2. Sponsor/Manager commitment: ₹5 crore

• The ₹5 crore commitment is being relied upon to meet the ₹20 crore minimum corpus.

• After the First Close, the Sponsor or Manager cannot reduce, withdraw or transfer that ₹5 crore commitment.

12.1.5.

• The First Close of a Large Value Fund for Accredited Investors (LVF) scheme must be declared within 12 months.

• The 12-month period is calculated from the later of the following two dates:

  1. Date of grant of registration of the AIF or

  2. Date of filing of the PPM of the scheme with SEBI.

Example:

• AIF registration granted on 1 January 2026.

• PPM filed with SEBI on 1 April 2026.

• The later date is 1 April 2026.

• Therefore, the First Close must be declared within 12 months from 1 April 2026, i.e. by 31 March 2027.

12.1.6.

• If the First Close of an AIF scheme is not declared within the prescribed timeline, the AIF cannot continue with the scheme under the existing filing.

  1. The AIF must file a fresh application with SEBI for launching the scheme.

  2. The fresh application must comply with the applicable provisions of the AIF Regulations.

• The AIF must also pay the requisite fee to SEBI while making the fresh application.

Example:

• An AIF becomes eligible to launch its scheme on 1 September 2026.

• The First Close is required to be declared within the prescribed 12-month period.

• If the AIF fails to declare the First Close within that period:

  1. It must file a fresh application with SEBI;

  2. The application must comply with the applicable AIF Regulations; and

  3. The requisite SEBI fee must be paid.

12.2. Calculation of tenure of close-ended schemes of AIFs

12.2.

• Under Regulation 13(4) of the AIF Regulations, SEBI may specify the manner in which the tenure of a close-ended AIF scheme is to be calculated.

• SEBI may also specify the manner in which the tenure of the scheme can be modified.

• Therefore, AIFs must follow the specific requirements prescribed by SEBI regarding:

  1. Calculation of the scheme's tenure.

  2. Modification or extension of the scheme's tenure.

Example:

• A close-ended AIF scheme has a specified tenure of 5 years.

• The manner in which those 5 years are calculated and any permitted modification of the tenure must follow the requirements specified by SEBI.

12.2.1.

• The tenure of a close-ended AIF scheme shall be calculated from the date on which the First Close is declared.

• The date of registration of the AIF or the date of launch of the scheme is not the starting point for calculating the tenure.

Example:

• An AIF scheme has a tenure of 5 years.

• The First Close is declared on 1 September 2026.

• The 5-year tenure will be calculated from 1 September 2026.

12.2.2.

• An AIF may modify the tenure of a close-ended scheme at any time before the declaration of its First Close.

• Before the First Close is declared, investors also have the flexibility to:

  1. Withdraw their commitment

  2. Reduce the amount of their commitment

• to the AIF scheme.

• Once the First Close is declared, this flexibility to modify the tenure or withdraw/reduce commitments does not apply under this provision.

Example:

• An AIF proposes a scheme with a tenure of 5 years.

• Before the First Close:

  1. The AIF may modify the proposed tenure, for example, from 5 years to 7 years.

  2. Investor A may withdraw its ₹2 crore commitment.

  3. Investor B may reduce its commitment from ₹3 crore to ₹2 crore.

12.2.3.

• Schemes of AIFs that had already declared their First Close on or before 17 November 2022 may continue to calculate their tenure from the date of Final Close.

• This is an exception to the general rule that the tenure of a close-ended scheme is calculated from the date of First Close.

• For such existing schemes that have not yet declared their Final Close:

  1. The Final Close must be declared within the timeline specified in the PPM.

  2. The AIF or Manager has no discretion to extend this timeline beyond what is stated in the PPM.

Example:

• An AIF scheme declared its First Close on 1 October 2022.

  1. Since the First Close was declared before 17 November 2022, the scheme may calculate its tenure from the Final Close.

  2. The PPM states that the Final Close must be declared within 2 years from the First Close.

  3. The AIF/Manager cannot later decide to extend this 2-year period