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Fund structures are gaining popularity among wealthy individuals in India as optimum structures to help with wealth planning, investments, and tax management. Family offices are viewing GIFT City, India’s first international financial services centre (“IFSC”), for the purpose of facilitating global investments in a structured manner.
The IFSC funds regime envisages a ‘Family Investment Fund’ (“FIF”) as a self-managed fund set up in the IFSC for pooling money from a ‘single family’. FIFs can be set up as either (i) companies, (ii) contributory trust, (iii) LLPs or in other forms permitted by the International Financial Services Centres Authority (“IFSCA”) and can operate as close ended or open ended schemes, and are permitted to invest in shares, securities real estate, bullion and in certain other assets. To promote the setup of family investment funds in IFSC, the IFSCA, vide a circular dated March 01, 2023,[1] has provided certain relaxations with respect to Family Investment Funds under the IFSCA (Fund Management) Regulations, 2022 (“FM Regulations”). This article explores the key modifications that have come into force and how they would positively impact the functioning of a family office in IFSC.
To sum up, it is remarkable to note the manner in which the IFSCA has provided an impetus to single families to set up FIFs in the IFSC, while protecting the interests of non-family members holding economic interest in the family’s entity. The IFSCA has broadened the eligibility criteria for single families by recognising various types of entities and introducing a minimum threshold to ensure that the family’s interest is not diluted. These clarifications are a positive step by the IFSCA towards providing a conducive regulatory environment for family offices to thrive.
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