Collective Investment Schemes (CIS) are a popular investment vehicle where funds from multiple investors are pooled together to invest in a specific asset or a portfolio of assets. These schemes are professionally managed and the profits or income generated are shared among the investors in proportion to their investment. In India, CIS are strictly regulated by the Securities and Exchange Board of India (SEBI) to protect investors' interests.
1. Overview:
A Collective Investment Scheme is essentially a professionally managed fund. It is a structure where investors contribute their money with a common objective-to earn returns from a specific investment strategy. A CIS is distinct from mutual funds and other investment vehicles and is governed by the SEBI (Collective Investment Schemes) Regulations, 1999. Key participants include the Collective Investment Management Company (CIMC) which organizes and manages the scheme and a Trustee who acts for the benefit of the unitholders.
2. Benefits:
- Professional Management: The schemes are managed by experienced professionals, allowing investors to benefit from expert analysis and decision-making without having to manage the investments themselves.
- Diversification: By pooling funds, a CIS can invest in a wide range of assets, which helps in diversifying risk across different sectors and asset classes.
- Accessibility: It allows individuals to invest in high-value assets like real estate or land which they might not be able to afford on their own.
- Liquidity: Depending on the scheme, investors can liquidate their holdings (units) more easily than selling the underlying assets directly.
3. Documents Required:
Registering a Collective Investment Management Company (CIMC) with SEBI is a comprehensive process that requires a range of legal, financial and corporate documents. While the exact list may vary, some of the most critical documents include:-
- Company Incorporation Documents: Certificate of Incorporation, Memorandum of Association (MoA) and Articles of Association (AoA) of the company. The MoA must clearly state the objective of managing a collective investment scheme.
- Trust Deed: A trust deed registered under the Registration Act. This document outlines the powers and obligations of the trustee.
- KYC Documents: Identity and address proofs of all directors and key management personnel of the CIMC.
- Financial Statements: Audited financial statements of the company for the last three years (or from incorporation).
- Investment Management Agreement: A draft of the agreement between the trustee and the CIMC.
- Director Details: A list of directors, along with details of their professional experience and integrity.
- Business Plan: A detailed business plan and proposed investment model for the schemes.
3. Documents Required:
Registering a Collective Investment Management Company (CIMC) with SEBI is a comprehensive process that requires a range of legal, financial and corporate documents. While the exact list may vary, some of the most critical documents include:-
- Company Incorporation Documents: Certificate of Incorporation, Memorandum of Association (MoA) and Articles of Association (AoA) of the company. The MoA must clearly state the objective of managing a collective investment scheme.
- Trust Deed: A trust deed registered under the Registration Act. This document outlines the powers and obligations of the trustee.
- KYC Documents: Identity and address proofs of all directors and key management personnel of the CIMC.
- Financial Statements: Audited financial statements of the company for the last three years (or from incorporation).
- Investment Management Agreement: A draft of the agreement between the trustee and the CIMC.
- Director Details: A list of directors, along with details of their professional experience and integrity.
- Business Plan: A detailed business plan and proposed investment model for the schemes.
5. Fees and Timelines:
The fees and timelines for CIS registration in India are prescribed by SEBI and can be a significant investment.
- Application Fees: A non-refundable application fee of ₹25,000 is typically paid at the time of submission.
- Registration Fees: A registration fee of ₹10 lakh is paid after SEBI's initial confirmation.
- Professional fees: For obtaining a quote contact us directly.
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- Timelines: The entire process, from filing the application to receiving the certificate, can take anywhere from 05 to 06 weeks, assuming all documents are in order and there are no objections from SEBI. Any discrepancies or requests for additional information can extend this timeline.
Frequently Asked Questions
As per SEBI regulations, a company must have a net worth of at least ₹5 crore. However, at the time of application, a net worth of ₹3 crore is acceptable, provided it is increased to ₹5 crore within three years from the date of registration.
No, SEBI regulations prohibit any Collective Investment Scheme from offering a guaranteed return to investors. This is to ensure investors are fully aware of the market risks involved.
The trustee's primary role is to protect the interests of the investors (unitholders). They are responsible for overseeing the CIMC's operations and ensuring that the scheme's activities comply with all SEBI regulations.
