Touchstone Partners Research: FUND FORMATION- The Beginning of the Fund Lifecycle

The legal, tax and regulatory framework for investment funds is driven not just by the letter of the law but also by unwritten and commonly understood regulatory and tax customs. SEBI’s approach continues to move away from laissez-faire to one that is distinctively hands-on. For instance, SEBI prescribed the form of private placement memorandum to be used by alternative investment funds in early 2020. More recently, SEBI has prescribed minimum experience standards for key personnel and introduced statutory liabilities for investment committee members. The tax authorities, on the other hand, are becoming more aware of complex offshore fund structures and looking at innovative fund structures more carefully.

Whilst a majority of the global financial sponsors still choose to invest in India out of their flagship funds with limited or no specific allocation for India, there has been an increasing trend in the past few years to raise India focused pools of capital. These could be in the form of vanilla blind pools or quasi-fund structures such as investment platforms or managed accounts with financial sponsors (or increasingly with developers) investing in private equity, private debt, public equity and public debt.

This paper aims to assist global fund counsel and fund managers on India focused fund formation from a legal, tax, regulatory, commercial and strategic perspective.