🌱 New Co-Investment Framework for AIFs in GIFT City: Empowering Venture Capital with Flexibility and Scale
- GIFT CFO
- May 30
- 2 min read
📅 Issued on: May 21, 2025 📍 By: International Financial Services Centres Authority (IFSCA) 🔍 Focus: Co-investment Framework for AIFs through Special Schemes by Venture Capital and Restricted Schemes
🚀 What’s the Big News?
The IFSCA has introduced a new framework to support co-investments by Venture Capital Schemes (VCS) and Restricted Schemes (RS) in GIFT IFSC. This framework allows Fund Management Entities (FMEs) to create Special Purpose Vehicles (SPVs) — termed “Special Schemes” — for focused investments in individual portfolio companies.
Consider it a strategic partnership model enabling fund managers and selected investors to co-invest with enhanced control, transparency, and regulatory clarity.
🔍 Why Co-Investment Framework in AIF Matters for the Fund Industry
This development is transformative, especially for Alternative Investment Funds (AIFs). Here's why:
It facilitates focused co-investments in promising companies.
Allows leverage within controlled limits.
Ensures regulatory compliance while offering investor flexibility.
Enhances the funding ecosystem for startups and growth-stage businesses from GIFT City.
🧱 How the Special Scheme Works
✅ Who Can Launch It?
Only FMEs with existing Venture Capital or Restricted Schemes can establish a Special Scheme under this framework.
✅ Structure
Can be organized as a Company, LLP, or Trust under Indian laws.
It will be registered under the same AIF category (I, II, or III) as the existing scheme.
✅ Key Investment Rules
The Special Scheme can only invest in a single company (exceptions allowed in case of corporate actions like mergers).
The existing scheme must hold at least 25% ownership in the Special Scheme.
💼 Investor Participation & Terms
Who can invest? Any eligible person, as per IFSCA regulations.
Minimum Disclosure: A term sheet with key investment and structural details must be filed within 45 days of investment.
Existing investors don’t need new KYC. New investors will need to comply with IFSCA KYC norms.
💸 Leverage and Control
Special Schemes can raise debt (leverage) — but only within limits disclosed in the main scheme’s placement memo.
FMEs retain full decision-making control. Co-investors cannot override FME decisions or regulatory obligations.
📑 Reporting & Compliance
Reporting of Special Scheme activities can be integrated with that of the main scheme.
SEZ approval is mandatory before filing the term sheet.
FMEs must pay applicable fees as per IFSCA’s latest fee circular (April 8, 2025).
📌 Final Takeaway
The Special Scheme framework:
Brings clarity and ease to co-investment structures.
Offers a regulated way to tap into focused investment opportunities.
Strengthens GIFT IFSC as a forward-looking, global fund management hub.
Whether you're a fund manager, investor, or ecosystem player in GIFT City, this new framework is your green light to collaborate, co-invest, and scale under a smart and secure regulatory structure.
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