SEBI by way of its Circular dated December 9, 2022, introduced the following requirements relating to foreign investment in Alternative Investment Funds (‘AIFs’):

i.    Foreign investors being onboarded by an AIF have to be resident of countries whose securities market regulator is a signatory to the International Organization of Securities Commission’s Multilateral Memorandum of Understanding (Appendix A Signatory) or a signatory to the bilateral Memorandum of Understanding with SEBI. AIFs may accept commitment from an investor being Government or Government related investor, who does not meet the aforesaid condition, if the investor is a resident in the country as may be approved by the Government of India; and

ii.   Foreign investor, or its underlying investors contributing 25% (twenty-five percent) or more in the corpus of the investor or identified on the basis of control, is not a person(s) mentioned in the Sanctions List notified from time to time by the United Nations Security Council and is not a resident in the country identified in the public statement of Financial Action Task Force as: (a) a jurisdiction having a strategic Anti-Money Laundering or Combating the Financing of Terrorism deficiencies to which counter measures apply; or (b) a jurisdiction that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with the Financial Action Task Force to address the deficiencies.

If any existing investors currently or subsequently do not meet the above conditions, then the manager of the AIF should not drawdown any further capital contribution from such investor for making an investment, until the investor again meets these conditions.