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ARTICLE · 03 NOVEMBER 2026

IFSCA Issues Framework For Grant Of Differential Distribution Rights To Investors

Lakshmikumaran & Sridharan
Lakshmikumaran & Sridharan
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Lakshmikumaran & Sridharan

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The International Financial Services Centres Authority has introduced a framework allowing Venture Capital and Restricted Schemes to grant differential distribution rights through senior and junior units. This regulatory shift enables fund managers to structure investments with varying risk-return profiles, potentially attracting diverse investor classes while maintaining strict disclosure and due diligence requirements.

IndiaFinance and Banking
Vinod Joseph
Vinod Joseph
Akhil Ganatra
Akhil Ganatra
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In brief

The International Financial Services Centres Authority (Fund Management) Regulations, 2025 were recently amended by inserting Regulation 23(5) and Regulation 35(6) to enable Venture Capital Schemes and Restricted Schemes to grant differential distribution rights to investors. The article discusses a recent Circular dated 25 September 2026 issued by the IFSCA, setting out a framework for the grant of differential distribution rights to investors and issuance of senior and junior or subordinate units.

The International Financial Services Centres Authority (Fund Management) Regulations, 2025 (‘FM Regulations’) were amended by the International Financial Services Centres Authority (Fund Management) (Second Amendment) Regulations, 2026 (‘7thSept Amendments’) with effect from 7 September 2026. Inter alia, Regulation 23(5) and Regulation 35(6) were inserted in the FM Regulations to enable Venture Capital Schemes and Restricted Schemes to grant differential distribution rights to

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