For a new Alternative Investment Fund (AIF) scheme, getting the placement memorandum (PPM) filed with SEBI is only the start. The scheme must then raise enough commitments to declare its first close, and SEBI gives it a fixed window of 12 months to do so. If fundraising runs late and the window lapses, the scheme cannot simply declare first close in month 13; the PPM has to be filed again and the fee paid again.
This article explains what first close means, when the 12-month period starts after the 2026 reforms to the launch process, the consequences of missing it, and a practical checklist for sponsors, investment managers and compliance teams of Category I, II and III AIFs.
Key points at a glance
- A scheme of an AIF must declare its first close within 12 months from the date on which it becomes eligible to launch.
- At first close, the scheme must have commitments of at least the minimum corpus of ₹20 crore (Regulation 10 of the SEBI (AIF) Regulations, 2012; different rules apply to Angel Funds).
- Under the GARUDA mechanism operationalised on 31 July 2026, a regular scheme may launch 10 working days after filing its PPM; Accredited Investors-only schemes, Large Value Funds and Angel Funds may launch on filing. A fund's first scheme cannot launch before registration is granted.
- If the first close is not declared in time, the PPM must be refiled with SEBI along with the requisite fee; the earlier filing lapses.
- The rules are consolidated in the SEBI Master Circular for AIFs dated 3 June 2026.
What is the first close of an AIF scheme?
First close is the point at which the investment manager formally closes the first round of fundraising for a scheme, having secured commitments at least equal to the minimum corpus. It marks the start of the scheme's operations: investors are on-boarded, drawdowns can begin and the investment period starts running. Subsequent closes may follow until the final close.
Under Regulation 10 of the SEBI (Alternative Investment Funds) Regulations, 2012 (read with the SEBI Master Circular for AIFs), each scheme must have a corpus of at least ₹20 crore. The sponsor's or manager's own commitment can count towards this, but once it is used to meet the minimum corpus it cannot be reduced, withdrawn or transferred after first close.
When does the 12-month first close period start?
The starting point has changed twice in 2026, as SEBI moved away from waiting for its own observations on the PPM before a scheme could launch.
| Period | When the scheme could launch | 12-month first close period runs from |
|---|---|---|
| Before 30 April 2026 | After SEBI communicated that the PPM was taken on record | Date of SEBI's communication taking the PPM on record |
| Fast-track mechanism, circular of 30 April 2026 | 30 days after filing the PPM (first scheme: later of registration or 30 days) | Date on which the scheme became eligible to launch |
| GARUDA mechanism, from 31 July 2026 | Regular schemes: 10 working days after filing. AI-only schemes, LVFs, Angel Funds: on filing. First scheme: not before registration | Date on which the scheme became eligible to launch |
Earlier descriptions of the rule often referred to the date of registration or the date of filing. After the 2026 changes, the correct reference is the eligibility date: for a first scheme this is often the registration date, and for later schemes it is the filing date plus the waiting period (if any).
Practical point: Any comments SEBI communicates during the waiting period must be incorporated in the PPM before it is circulated. The merchant banker (for regular schemes) and the manager remain responsible for the accuracy and adequacy of the disclosures, so a faster launch does not reduce diligence.
What happens if first close is not declared within 12 months?
The consequence is a regulatory reset rather than a penalty:
- The scheme cannot declare its first close after the 12-month period on the basis of the old filing.
- The manager must file the PPM afresh with SEBI, through a merchant banker where applicable, and pay the requisite scheme fee again.
- The new filing starts a new eligibility date and a new 12-month window.
- Commitments collected under the lapsed filing need to be revisited, since investors signed up to documents that must now be refiled and possibly updated.
For Angel Funds, the Master Circular states this expressly: an Angel Fund that fails to declare first close within 12 months of becoming eligible to launch must refile the PPM with SEBI and pay the requisite fee.
Worked example: tracking the first close deadline
Consider a Category II AIF that already has a registered first scheme and files the PPM of its second scheme on Monday, 3 August 2026, under the GARUDA mechanism.
- The scheme becomes eligible to launch 10 working days after filing, on or about 17 August 2026 (subject to holidays).
- The first close must be declared by about 16 August 2027, with commitments of at least ₹20 crore.
- By June 2027, commitments stand at ₹14 crore. The manager must either close the gap (for instance through additional sponsor commitment, which then becomes locked in) or accept that the filing will lapse.
- If first close is not declared by the deadline, the PPM is refiled, the scheme fee is paid again, and a fresh 12-month window starts from the new eligibility date.
Now consider a newly registered fund whose first scheme's PPM was filed in March 2026 and whose registration was granted on 1 October 2026. Because a first scheme cannot launch before registration, the eligibility date is 1 October 2026 and the 12-month period runs to 30 September 2027.
Why SEBI imposes a first close deadline
- Current disclosures: a PPM filed long ago may no longer describe the market, team or strategy accurately.
- No parked filings: managers should not hold filings indefinitely while testing investor appetite.
- Investor protection: investors who commit early should not wait open-ended for the scheme to become operational.
- Regulatory resources: filings that do not progress to launch are removed from the system.
Common mistakes around first close
Counting from the wrong date
Teams sometimes count 12 months from the registration certificate for every scheme, or from the date SEBI last wrote to them. The relevant date is the date of eligibility to launch the particular scheme.
Treating soft commitments as corpus
Only signed contribution agreements count towards minimum corpus. Letters of interest, term sheets or verbal assurances do not.
Using sponsor money as a temporary bridge
A sponsor commitment used to reach ₹20 crore cannot later be reduced, withdrawn or transferred. It should be sized as a long-term commitment, not a short-term plug.
Ignoring investor on-boarding requirements
KYC, accreditation checks (for AI-only schemes and LVFs), specific due diligence and demat account details for units must be in order before first close is declared.
Practical checklist for fund managers
- Record the filing date, the registration date (for a first scheme) and the resulting eligibility date in the compliance calendar.
- Diarise the 12-month first close deadline with reminders at 6, 9 and 11 months.
- Track signed commitments against the ₹20 crore minimum corpus every month.
- Decide early whether sponsor or manager commitment will be used to reach the minimum corpus, knowing it becomes locked in.
- Complete investor on-boarding, KYC and documentation before the first close date.
- Declare first close formally, and complete the reporting and intimations required by the Master Circular.
- If the deadline is likely to be missed, plan the refiling, fee and investor communication in advance.
Frequently Asked Questions on First Close in AIFs
What is the time limit for first close of an AIF scheme?
A scheme must declare its first close within 12 months from the date on which it becomes eligible to launch, as set out in the SEBI Master Circular for AIFs.
From which date is the 12-month first close period counted in 2026?
From the eligibility date to launch the scheme. Under the GARUDA mechanism, this is 10 working days after filing for a regular scheme and the filing date for AI-only schemes, LVFs and Angel Funds, but not earlier than registration for a fund's first scheme.
What happens if an AIF misses its first close deadline?
The scheme cannot declare first close on the old filing. The PPM must be filed afresh with SEBI along with the requisite fee, which starts a new 12-month window.
What is the minimum corpus required at first close?
Each scheme of an AIF, other than an Angel Fund, must have a corpus of at least ₹20 crore under Regulation 10 of the SEBI (AIF) Regulations, 2012.
Can the sponsor's commitment be counted towards the minimum corpus?
Yes. However, to the extent it is used to meet the minimum corpus, the sponsor's or manager's commitment cannot be reduced, withdrawn or transferred after first close.
Does SEBI still need to take the PPM on record before launch?
No, not for most schemes. After the fast-track (April 2026) and GARUDA (July 2026) changes, a scheme can launch after the prescribed waiting period, with the merchant banker and manager responsible for the disclosures.
Conclusion
Faster launch rules in 2026 have shortened the wait between filing and fundraising, but the 12-month first close deadline has not gone away; it now simply starts earlier. Sponsors and managers should align their fundraising plans with the eligibility date, count only firm commitments, and treat the deadline as a hard stop.
A missed first close is not only a commercial setback. It means refiling, paying fees again and re-engaging investors, which is avoidable with a clear timeline from the day the PPM is filed.
This article is intended for general information and knowledge sharing only and does not constitute professional advice or solicitation of any kind. Provisions are summarised as of September 2026. Readers should refer to the relevant provisions, regulations and judicial pronouncements for their specific facts.