What is the Right Legal Structure for AIF Registration in India
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Choosing the right legal structure is a crucial step for registering an Alternative Investment Fund (AIF) in India. As per SEBI (Alternative Investment Funds) Regulations, 2012, an AIF can be established in the form of a trust, a company, a limited liability partnership (LLP), or a body corporate. Among these, the trust structure is the most commonly preferred by fund sponsors and managers in India due to its flexibility, tax efficiency, and regulatory recognition.
The trust structure is typically set up through a Trust Deed between the sponsor and the trustee, with the fund manager acting under an Investment Management Agreement. It offers operational ease and is well-accepted under Indian legal and tax frameworks.
Alternatively, some AIFs are formed as LLPs or companies, especially when the fund’s structure aligns better with corporate governance models or sector-specific requirements. LLPs offer limited liability and a partnership-based structure but may involve additional regulatory complexity.
Ultimately, the right legal structure depends on factors such as the fund’s investment strategy, target investors, taxation, governance requirements, and long-term business goals. Engaging legal and financial advisors is recommended to ensure compliance and to select a structure that best supports the fund's objectives.