SEBI Proposes Changes in Provisions w.r.t Special Situation Funds to Facilitate Acquisition of Stressed Loans

  • Blog|News|Company Law|
  • 2 Min Read
  • By Taxmann
  • |
  • Last Updated on 30 November, 2023

SEBI's Special Situation Funds

Consultation Paper, Dated 28.11.2023

The Securities Exchange Board of India (SEBI) has released a Consultation Paper on changes in the regulatory framework for Special Situation Funds, a sub-category of Category I Alternative Investment Funds, necessary to facilitate Special Situation Funds to acquire stressed loans in terms of Reserve Bank of India (Transfer of Loan Exposures) Directions, 2021.

In terms of Regulation 19I of AIF Regulations, ‘Special Situation Assets’, inter alia, include securities of investee companies, whose stressed loans are available for acquisition in terms of Clause 58 of the Master Direction – Reserve Bank of India (Transfer of Loan Exposures) Directions, 2021 or as part of a resolution plan approved under the IBC, 2016 or in terms of any other policy of the RBI or Government of India issued in this regard from time to time.

However, it was felt that a stressed loan under Section 58 of RBI Master Directions cannot be said to be ‘available’ for acquisition since the visibility of the stressed loan for acquisition occurs only after the lenders agree to the resolution plan submitted by the borrower.

The term ‘available for acquisition’ relies on the assumption that at a certain point of time, the stressed loans eligible for transfer in terms of Clause 58 of RBI Master Directions shall be visible to the SSFs.

Consequently, it has been proposed that ‘special situation asset’, inter alia, includes securities of investee companies, whose stressed loans are acquired in terms of Clause 58 of RBI Master Directions. Also, SSFs having prior investment in securities of stressed companies shall not be disqualified/barred from acquiring stressed loans of the said companies.

Further, it has also been proposed that AIF Regulations may be suitably amended to specify that SSFs shall not invest in or acquire a special situation asset if any of its investors is disqualified in terms of Section 29A of IBC in relation to such special situation asset.

Also, Regulation 19M(1) of AIF Regulations would be suitably amended to specify that ‘Special Situation Funds’ shall not invest in its ‘related parties’, the related party shall have the same meaning as given in the Companies Act, 2013. Various other proposals have also been made in the present consultation paper.

Click Here To Read The Full Updates

Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.

Leave a Reply

Your email address will not be published. Required fields are marked *

Everything on Tax and Corporate Laws of India

To subscribe to our weekly newsletter please log in/register on

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