With effect from April 1, 2021, the Securities and Exchange Board of India Act, 1992 (‘SEBI Act’) and the Securities Contracts (Regulation) Act, 1956 (‘SCRA’) have been amended to incorporate the amendments introduced by the Finance Act, 2021. Set out below are certain key changes:

i.    SEBI Act: No person can sponsor or cause to be sponsored or carry on or cause to be carried on the activities of an AIF or business trust (as defined in Section 2(13A) of the Income Tax Act, 1961), unless a certificate of registration is granted in accordance with the relevant regulations made under SEBI Act.

ii.   SCRA: The concept of ‘pooled investment vehicle’ (‘PVC’) has been introduced in the SCRA. Consequently, the definition of ‘securities’ has been expanded to include inter alia shares, scrips, stocks, debentures and other marketable securities of a PVC. PVCs (whether constituted as trusts or otherwise) registered with the Securities and Exchange Board of India (‘SEBI’) can borrow and issue debt securities in a prescribed manner. Such PVCs, subject to their trust deed, can provide security interest to lenders in terms of the facility documents entered into by them. If the PVCs default in repayment of the principal amount or interest or any amount due to the lender, the lender can recover the defaulted amount and enforce the security interest, if any, against the trust assets by initiating proceedings against the trustee, acting on behalf of the PVC, in accordance with the provisions of the facility documents. However, the trustee will not be personally liable and his assets will not be used to recover such debt. After recovery of the defaulted amount, the trust assets that remain will be remitted to the unit holders on a proportionate basis.