SEBI Notifies Regulation 17A on Co-Investment by AIF Investors

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  • Last Updated on 10 September, 2025

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SEBI Regulation 17A Co-Investment AIFs

Notification No. SEBI/LAD-NRO/GN/2025/265., Dated 08.09.2025

1. Introduction

The Securities and Exchange Board of India (SEBI) has introduced Regulation 17A under the SEBI (Alternative Investment Funds) Regulations, 2012. This new provision prescribes detailed conditions for co-investment by investors of Category I and II AIFs, ensuring a transparent framework that safeguards investor interests while enabling collaborative investment opportunities.

2. Definition of Co-Investment

Under the new regulation, co-investment refers to an investment made by a manager, sponsor, or investor of a Category I or Category II Alternative Investment Fund in the unlisted securities of investee companies where such AIFs themselves make investments. The regulation seeks to bring clarity and uniformity in how such co-investments are structured and monitored.

3. Permitted Routes for Co-Investment

SEBI has clarified that such co-investments shall be permitted only through a co-investment scheme or a Co-Investment Portfolio Manager. To ensure compliance and transparency, this requires the filing of a shelf placement memorandum, thereby standardising documentation and disclosures. This move restricts the practice to formalised structures and reduces the risks associated with informal arrangements.

4. Eligibility and Investment Conditions

Importantly, eligibility to invest in a co-investment scheme is restricted to accredited investors of Category I or II AIFs. Each co-investment scheme must invest in only one investee company, and the investment terms must not be more favourable than those offered to the AIF itself. Additionally, the exit of the co-investment must be aligned with that of the AIF, and once exited, the scheme must be wound up thereafter. These safeguards ensure parity among investors and prevent preferential treatment.

5. Conclusion

The insertion of Regulation 17A marks a significant step in enhancing the governance framework for AIFs in India. By laying down clear rules on definition, structure, eligibility, and exit conditions, SEBI aims to ensure fairness, transparency, and accountability in co-investments. These measures are expected to build greater investor confidence, promote responsible investing, and strengthen the credibility of the Alternative Investment Fund ecosystem.

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied