SEBI Proposes Uniform 75% Investor Consent Threshold For AIFs

The Securities and Exchange Board of India (SEBI) on Tuesday proposed a uniform approval threshold of 75% investor consent by value for decisions under the Alternative Investment Funds (AIF) framework that require investor approval.

The proposal is part of a consultation paper aimed at simplifying investor consent requirements and tightening rules governing conflict-of-interest transactions.

The regulator said the existing framework prescribes different approval thresholds for different matters. It also does not lay down a uniform method for obtaining investor consent.

According to SEBI, this has resulted in varied market practices, particularly in the way votes are counted and non-responses are treated. It observed that these differences have created ambiguity and operational challenges.

To address these issues, SEBI has proposed prescribing a uniform approval threshold of 75% investor consent by value.

It observed that the change would bring consistency across provisions, facilitate ease of operations and continue to safeguard investor interests.

SEBI has also proposed allowing AIFs to choose one of three methods for obtaining investor consent.

AIFs would be allowed to choose one of three methods for obtaining investor consent: deemed consent, present and voting, or express voting. The selected method would have to be disclosed to investors and applied consistently for the relevant fund or scheme

The chosen methodology would have to be disclosed to investors and applied consistently for the relevant fund or scheme.

The consultation paper also proposes changes to the framework governing conflicted transactions. SEBI observed that the current definition of "associate" is narrow and limits the range of transactions that require investor consent. At the same time, certain transactions outside that definition may present comparable conflicts of interest.

SEBI has proposed replacing the term "associate" with "related party" in provisions governing conflict-of-interest transactions. The new definition would be based on the Companies Act, 2013, with modifications for the AIF framework. The regulator said the move would improve transparency and conflict management without disrupting the day-to-day functioning of AIFs.

Public comments have been invited until July 21, 2026.