SEBI Vide circular dated September 09, 2025, introduced a new framework enabling Category I and II Alternative Investment Funds (AIFs) to offer co-investment opportunities to accredited investors within the AIF structure

Answer 6(b) SEBI vide circular dated September 09, 2026 introduced a new framework enabling Category I and II Alternative Investment Funds (AIFs) to offer co-investment opportunities to accredited investors within the AIF structure itself, through the launch of separate Co-Investment Schemes (CIV schemes). Key Highlights of the circular are as under: i. SEBI has permitted Category I and II AIFs to offer Co-Investment facilities within the AIF structure by launching CIV schemes, in addition to the existing Portfolio Management Services (PMS) route. ii. A Shelf Placement Memorandum must be filed as per the prescribed template by SEBI, that inter-alia includes governance structure, regulatory framework, and principal terms of co-investment. iii. Each CIV scheme must maintain separate bank and demat accounts, assets must be ring-fenced from other schemes. iv. Investor's co-investment via CIV schemes in a company must not exceed 3 times their investment in the main AIF scheme, except for: Multilateral/ Bilateral Development finance institutions (DFIs) Government-owned entities Sovereign Wealth Funds and Central Banks v. Investors excused, excluded, or defaulting in main AIF scheme investment cannot co-invest via CIV in that company. CIVs must not invest in a manner that: creates indirect exposure the investor cannot hold directly; requires additional disclosure if done directly; breaches eligibility norms for direct investment in the investee. Additionally, no leverage or borrowing is allowed by CIV schemes. vi. Proceeds and rights from CIV investments are pro-rata, subject to carried interest or equivalent, if applicable. Co-investment expenses to be shared proportionally between AIF scheme and CIV scheme based on investment ratio. vii. CIV schemes must comply with standards (if any) developed by the Standard Setting Forum of AIFs (SFA) in consultation with SEBI. These standards shall be published by industry associations like Indian Venture and Alternate Capital Association (IVCA), Private Equity Venture Capital Chief Financial Officer Association (PEVCCFO), and Trustee Association of India. viii. AIF trustees/sponsors must ensure that the Compliance Test Report (CTR) includes adherence to this framework, as per Chapter 15 of the SEBI Master Circular for AIFs.