Subscription Agreement

This one is not written up yet

The definition above is the short version. A full explanation — how it works, a worked example and the exam traps — is still being written. In the meantime the chapter below covers it in context.

Written up from the same chapter

• Adverse selectionThe risk of ending up with the wrong manager — picking a fund on a track record or a forward-looking statement that does not predict performance, and getting sub-optimal returns or moral hazard instead.
• Continuing interestThe sponsor's or manager's own money locked into the fund — 2.5% of corpus or Rs 5 crore, whichever is lower, for Category I and II AIFs, and 5% or Rs 10 crore for Category III.
• Contribution AgreementThe agreement between one investor, the trustee and the investment manager that sets the terms on which that investor participates in the AIF — the contract that turns a commitment into units.
• CustodianThe SEBI-registered entity that holds a fund's securities in accounts of its own and settles its trades, so the assets sit somewhere other than with the manager who decides what to buy.
• Determinate trustA trust whose beneficiaries and their beneficial interests are ascertainable from the trust deed throughout its life — the structure that lets a Category III AIF avoid MMR on non-business income.
• Investment Advisory AgreementThe agreement under which an offshore fund takes non-binding investment advice from an on-site Indian advisor — advice, not management, which is exactly what keeps the two roles apart.