Collective Investment Schemes

Collective Investment Schemes are considered as pools of investments where different people carry out investments in a particular asset. More than one person would invest in such a scheme. Collective Investment Schemes are regulated under The Securities and Exchange Board of India (Collective Investment Schemes..

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Collective Investment Schemes- An Overview

Collective Investment Schemes is a particular scheme of investment where different individuals invest in a particular asset. This form of scheme is something similar to a mutual fund. However, it is not a mutual fund. Such provision is present under Section 11AA (2) of the Securities and Exchange Board of India (SEBI) Act, 1992, where a company offers some form of arrangement to collect the contributions made by different investors. The main objective of having this form of collective investment scheme is to get some form of income or profit as a result of this investment. As per the SEBI Ordinance, 2013 if there is a collection or corpus of funds which exceeds the value of 100 crore, then it would be considered as a collective investment scheme. This would be considered as a CIS even if it is not registered with the SEBI. Such CIS is understood as a deemed CIS. In the UK, Unit Trusts which are offered by different forms of financial companies are considered as CIS. However, in India, any form of mutual fund or unit trust is not considered as a collective investment scheme.

Benefits of Collective Investment Schemes

Portfolio of Securities

Maximisation of Profits

Diversification

Liquidity

Which are not considered as a collective investment schemes?

There are several schemes which are not classified as collective investment schemes. The following are the schemes which are not considered as a CIS:

• Any insurance transaction or insurance contract for which the provisions of the Insurance Act, 1938 would operate.
• Any form of deposits which are accepted by Non Banking Financial Companies (NBFC).
• Any scheme which is developed by a Co-operative Society or a Society under the Society Registration Act.
• Any contributions which are donated to a particular portfolio which comprises a mutual fund
• Any form of pension fund or insurance scheme in accordance with the requirements of the Employee Provident Fund and Miscellaneous Provisions Act, 1952.
• Any form of chit funds under the provisions of the Chit Fund Act, 1982.
• Any form of deposits which come under section 73 to 76 of the Companies Act, 2013.

Parties involved in Collective Investment Schemes

The following parties are involved in collective investment schemes:

Shareholders

Collective Investment Management Company

Trustee

Manager of the Fund

Eligibility Criteria for Registering under Collective Investment Schemes

The following eligibility criterion has to be sufficed by the applicant for registering under Collective Investment Schemes:

• The company must be set up either under the provisions of the Companies Act, 2013 or the Companies Act, 1956.
• The main objects of the Memorandum of Association (MOA) must be to manage collective investment schemes.
• The net worth of the applicant must be 5 crores or more. At the time of filing the application, the net worth of the applicant can be 3 crores. However, within 3 years from the date of registering the application, the net worth should be 5 crores.
• The applicant has to satisfy the requirements as per the fit and proper person test.
• Infrastructural Facilities should be present with the applicant. This would mean, the applicant should have a leased premises or an own premises to carry out the activities under the CIS.
• Directors and other key management individuals of the company must have integrity.
• Directors and other key management individuals should not be convicted or charged with any offences involving moral turpitude or criminal convictions under any form of securities law.
• 50% of the directors should be independent. They must be related to the controllers of the Collective Investment Management Company.
• The applicant for registering under collective investment schemes must not be rejected in the past.
• One of the directors of the collective investment management company must be a representative of the trust. Such director should not be retired.
• The company (Collective Investment Management Company) must not be or act as a representative of any other form of scheme.
• Any applicant who already has an existing collective investment scheme should comply with the provisions of Chapter IX.

Procedure for Registering as a Collective Investment Management Company (Collective Investment Schemes)

If an applicant wants to handle collective investment schemes, then they must first set up a collective investment management company. As per section 3 of the Securities and Exchange Board of India (Collective Investment Schemes) Regulations, 1999, an applicant cannot manage a CIS without having an effective certificate of registration.

Application

Fee

Mode of Payment of the Fee

Confirmation

Appeal

Certificate

Terms and Conditions

Restriction on Activities of the CIS Company under Collective Investment Schemes

• This form of company cannot take part in any other activity other than managing the scheme.
• This company must not act as a trustee for any other collective investment scheme.
• This company cannot launch any form of scheme for active investing. However, the company can carry out any form of investment in its own scheme.

Documents required

The following Documents are required for a collective investment scheme company:

• Information related to the directors of the company
• Certificate of Incorporation of the Company
• KYC details of the directors
• Form A- To be duly filled by the applicant
• Information on Net Worth- Annual Financial Statements
• Information on the property- whether leased or own
• Memorandum of Association (Objects)
• Articles of Association of the Company.

How to reach Enterslice for Collective Investment Scheme

Fill The Form

Get a Callback

Submit Document

Track Progress

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Frequently Asked Questions

What are collective investment schemes?

Collective Investment Schemes are considered as a pool of investment by different forms of investors. These investors would invest in a particular asset.

What is the main motive behind this scheme?

The main motive behind such a scheme is to maximise the amount of investment through different forms of assured returns.

Can a pension fund be considered as a collective investment scheme?

No, a pension fund cannot be considered as a collective investment scheme.

Can insurance activities or some form of investment through insurance be considered under this scheme?

No, any form of transaction which would have the provisions related to insurance would not be considered under this scheme.

Can a unit trust be under this scheme?

Any form of units related to a unit trust, cannot be considered for the purposes of this scheme.

What is a collective investment management company?

A company which is involved in carrying out the activities of a CIS is known as a collective investment management company.

What is the role played by a trustee?

A trustee plays a crucial role in handling this scheme. As this comprises a portfolio of different forms of securities of individuals, such portfolio must be effectively handled with diligence and integrity. Hence a trustee is appointed to act on behalf of the beneficiaries in handling the securities under this scheme.

What is the minimum capital required for this scheme?

The net worth of the applicant must be 5 crores or more ( At the time of filing the application, the net worth of the applicant can be 3 crores). However, within 3 years from the date of registering the application, the net worth should be 5 crores.