Legal structure for pooling investment
Querist :
Anonymous
(Querist) 07 June 2010
This query is : Resolved
Hi - we are planning to get funds from Friends and Colleagues - both in India and abroad to invest in Indian Equities - both private and listed. We are targeting Rs. 25 Cr. to start with, under multiple schemes - differing on investment as well as profit distribution objectives.
We would be seeking legal help to put this structure in place, but would like to develop initial understanding to engage the right professional help.
Our plan was to get these Funds in multiple trusts (one for each scheme) and manage them through an Investment Company (NBFC - with the objective of investment management). However, it looks like we would then fall under Collective Investment Scheme. The compliance and set up charges associated with an CIS would make the whole plan unviable for a 25 Cr. Corpus. Is there a better way to go about it? Should we set up multiple Investment Companies (instead of Trusts that is being managed by a CIMS) and do not fall under the purview of SEBI CIS act?
Daksh
(Expert) 08 June 2010
Dear Anonymous,
Considering the practicality my suggestion is to first get at least two Companies incorporated i.e. one being a authorized Depository Participant in whose Memorandum it should be specifically mentioned that it will carry its affair as per the authorization of SEBI, NSE, BSE, NCDEX, NSDL etc.
Secondly the other entity can act as a fund manager of your friends and collegue and can act as their investor as previously by specific SEBI notification it has been banned that a Depository cannot extend loan facility for trading purposes.
Last but not least there is a need to look into the functions of a brokerage fund manager to come out of the perview of the collective investient management.
Best Regards
Daksh
