A newly registered Alternative Investment Fund (AIF) may spend its first year building a team, filing a placement memorandum and speaking to investors without receiving any money. It is easy to assume that with no investors and no investments there is nothing to report. SEBI's framework takes the opposite view: the absence of activity has to be confirmed, not assumed.
This article explains the requirement for a Chartered Accountant's certificate where an AIF has not raised funds, how it fits with the annual PPM audit, what the certifying accountant should verify, and the obligations that continue even in a nil year. It is intended for investment managers, sponsors, trustees and practising accountants.
Key points at a glance
- Every AIF must have an annual audit of compliance with the terms of its PPM, reported within 6 months of the financial year-end.
- The PPM audit does not apply to an AIF that has not raised any funds from investors.
- Such an AIF must instead submit a certificate from a Chartered Accountant that no funds have been raised, within 6 months of the year-end.
- The certificate is based on verification of bank accounts, commitment and unit records, and related documents, not on a management statement alone.
- Other obligations of a registered AIF, such as periodic filings and fee payments, continue as applicable.
What does SEBI require when an AIF has not raised funds?
The SEBI Master Circular for AIFs (now dated 3 June 2026) requires the audit of compliance with the terms of the PPM to be conducted at the end of each financial year, with findings communicated to the trustee, the manager's board and SEBI within 6 months. It then provides that this requirement does not apply to AIFs that have not raised any funds from investors, but such AIFs must submit a certificate from a Chartered Accountant to the effect that no funds have been raised, within 6 months from the end of the financial year.
In other words, the certificate replaces the PPM audit for a nil year; it does not replace the need to report.
Why the requirement exists
- Regulatory visibility: SEBI knows which registered AIFs are active and which are not.
- No unreported fund movements: it rules out money received informally, through advances, or in the sponsor's or manager's accounts pending on-boarding.
- Accountability: the fund's position is confirmed by an independent professional, creating an audit trail for inspections.
Comparison: PPM audit vs CA certificate
| Aspect | AIF that has raised funds | AIF that has not raised funds |
|---|---|---|
| Requirement | Audit of compliance with terms of the PPM | Certificate from a Chartered Accountant that no funds have been raised |
| Timeline | Within 6 months of year-end | Within 6 months of year-end |
| Output | Findings and corrective steps | Confirmation of nil fund raising |
| Recipients | Trustee or AIF board, manager's board, SEBI | SEBI (and placed before the trustee and manager as good practice) |
What should the Chartered Accountant verify?
A certificate is only as good as the evidence behind it. In practice, the certifying accountant should examine:
- Bank statements of all accounts of the AIF and its schemes for the full year, including any escrow or collection accounts.
- Commitment records: whether any contribution agreement has been signed and whether any drawdown notice was issued.
- Unit records: the register of unitholders and depository records, to confirm no units were allotted.
- Accounts of the sponsor and manager, to check that no investor money was received on behalf of the AIF.
- Minutes of the trustee, investment committee and manager's board for any decision to accept funds or make investments.
- Investor on-boarding records (KYC, accreditation certificates), which may indicate that funds were expected or received.
- A management representation letter confirming completeness of the information provided.
The certificate should state the period covered, the procedures performed, the documents examined and the conclusion, and carry a UDIN as required by the Institute of Chartered Accountants of India for certificates issued by members.
Practical point: Sponsor contributions count. If the sponsor or manager has paid any part of its own commitment into the scheme, funds have been raised, and the scheme is no longer in a nil position for this purpose.
Illustrative example
Consider a Category II AIF registered in May 2025. Its first scheme's PPM is filed, but no contribution agreement is signed by 31 March 2026.
- No PPM audit is required for FY 2025-26 because no funds were raised.
- The AIF obtains a CA certificate confirming that no funds were raised during FY 2025-26, after verification of its bank accounts, commitment register and unit records.
- The certificate is submitted to SEBI by 30 September 2026.
- In FY 2026-27 the scheme declares first close. For that year, the full PPM audit applies.
Obligations that continue in a nil year
A certificate for nil fund raising does not suspend the AIF's other obligations. Depending on the fund's status, these may include:
- periodic reports on the SEBI Intermediary Portal, as required by the relevant circulars;
- consolidated intimation of any changes made to the PPM during the year, within one month of the year-end;
- tracking the 12-month first close deadline for any scheme whose PPM has been filed;
- maintaining the compliance officer, key personnel certification and records required of a registered AIF;
- preparation and audit of the AIF's own financial statements where applicable under its constitution.
Common mistakes
- Filing nothing on the basis that there was nothing to report.
- Relying on a self-declaration from the manager in place of a CA certificate.
- Overlooking money received in the sponsor's or manager's account for the AIF.
- Issuing a certificate covering only part of the year, or without examining all bank accounts.
- Missing the 6-month deadline because the requirement was not on the compliance calendar.
Frequently Asked Questions on AIFs That Have Not Raised Funds
Does an AIF that has not raised funds need a PPM audit?
No. The PPM audit does not apply, but the AIF must submit a Chartered Accountant's certificate stating that no funds have been raised.
What is the due date for the CA certificate?
Within 6 months from the end of the financial year, that is, by 30 September for a March year-end.
What does the Chartered Accountant check before certifying?
Bank statements, contribution agreements, drawdown notices, unit and depository records, minutes, and the sponsor's and manager's accounts, supported by a management representation.
Does a sponsor contribution count as funds raised?
Yes. Money contributed by the sponsor or manager to a scheme is money raised by the AIF, so the nil certificate would not be appropriate.
Are other compliances waived if no funds are raised?
No. Periodic filings, intimation of PPM changes, first close timelines and other obligations of a registered AIF continue as applicable.
Conclusion
For an AIF, a quiet year still needs a formal close. The Chartered Accountant's certificate converts an assumption of inactivity into verified evidence, gives SEBI visibility and leaves an audit trail for later inspection.
Placing the certificate on the compliance calendar alongside the PPM audit deadline ensures that the transition from a nil year to an active year is handled without gaps.
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.