Key Takeaways
- • India's alternative investment fund (AIF) industry is petitioning for legislative authority to convert trust-based structures into limited liability partnerships (LLPs), citing structural friction in attracting foreign capital and international fund managers.
- • Approximately 97% of registered AIFs currently operate as trusts, but LLPs represent a more familiar and operationally efficient vehicle for overseas investors and managers familiar with global fund structures.
- • The AIF industry will present its case to a joint parliamentary committee reviewing the proposed Corporate Laws (Amendment) Bill 2026, which introduces a transition framework enabling trust-to-LLP conversions for registered AIFs.
- • International limited partners face additional legal hurdles when investing in trust-based AIFs, including mandatory legal opinions, trustee approval workflows, and potential LP agreement amendments—barriers that LLP structures would eliminate.
- • The conversion process is estimated to take 45–60 working days and cost between ₹15,000 to ₹50,000 depending on complexity and regulatory approval requirements, though tax neutrality concerns remain under current legislative language.
Summary
India's private equity and venture capital sectors are pushing for structural reform to enhance competitiveness in attracting foreign investment. The fund industry has launched a coordinated advocacy effort calling for streamlined conversion of alternative investment funds from trust-based entities into limited liability partnerships, a shift designed to address material structural frictions that impede capital inflows.
The rationale centers on institutional familiarity and operational efficiency. Currently, 97% of registered AIFs operate under trust structures, which diverge significantly from the LLP model prevalent in mature capital markets. International limited partners report friction in the onboarding process for trust-based vehicles, which typically requires additional legal opinions, trustee approval workflows, and sometimes amended partnership agreements. LLP structures, introduced to Indian law in 2008 and now widely adopted by entrepreneurs, eliminate these procedural barriers and align Indian funds with investor expectations globally.
The industry is leveraging the Corporate Laws (Amendment) Bill 2026 as the vehicle for legislative change. The bill introduces a formal transition framework that would grant registered AIFs a statutory pathway to convert from trusts to LLPs without requiring dissolution and re-establishment. This represents material reform for the AIF ecosystem, as it addresses what the industry frames as "structural frictions" hampering India's pursuit of foreign capital. The AIF industry plans to present detailed feedback to the joint parliamentary committee tasked with ratifying the proposed amendments.
Practical implementation details indicate moderate conversion friction at the administrative level. The conversion process requires 45–60 working days and entails costs between ₹15,000 to ₹50,000, depending on fund complexity and whether SEBI approval is required. However, questions remain regarding tax neutrality in the current legislative draft, suggesting that industry stakeholders view the proposal as incomplete in its current form and intend to advocate for refinements during the parliamentary consultation process.
The rationale centers on institutional familiarity and operational efficiency. Currently, 97% of registered AIFs operate under trust structures, which diverge significantly from the LLP model prevalent in mature capital markets. International limited partners report friction in the onboarding process for trust-based vehicles, which typically requires additional legal opinions, trustee approval workflows, and sometimes amended partnership agreements. LLP structures, introduced to Indian law in 2008 and now widely adopted by entrepreneurs, eliminate these procedural barriers and align Indian funds with investor expectations globally.
The industry is leveraging the Corporate Laws (Amendment) Bill 2026 as the vehicle for legislative change. The bill introduces a formal transition framework that would grant registered AIFs a statutory pathway to convert from trusts to LLPs without requiring dissolution and re-establishment. This represents material reform for the AIF ecosystem, as it addresses what the industry frames as "structural frictions" hampering India's pursuit of foreign capital. The AIF industry plans to present detailed feedback to the joint parliamentary committee tasked with ratifying the proposed amendments.
Practical implementation details indicate moderate conversion friction at the administrative level. The conversion process requires 45–60 working days and entails costs between ₹15,000 to ₹50,000, depending on fund complexity and whether SEBI approval is required. However, questions remain regarding tax neutrality in the current legislative draft, suggesting that industry stakeholders view the proposal as incomplete in its current form and intend to advocate for refinements during the parliamentary consultation process.
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