PRIVATE PLACEMENT MEMORANDUM AUDIT REPORT

What is Private Placement Memorandum?

When a company or fund seeks to raise capital through a private securities offering, they provide prospective investors with a legal document called a Private Placement Memorandum (PPM). It is a comprehensive guide that provides an overview of the investment opportunity, its risks, and essential details that help investors make informed decisions. PPMs are particularly significant in private investments because they replace the detailed disclosures required in public offerings.

What is PPM Audit?

A PPM audit report is a document that verifies an Alternative Investment Fund’s (AIF) compliance with the terms of its Private Placement Memorandum (PPM).

Purpose:

1. To guarantee consistent compliance standards
2.  To facilitate compliance reporting
3.  To assist AIFs in comprehending reporting obligations
4.  To address or resolve potential reporting concerns
5. To expedite compliance processes
6. To improve transparency in the AIF sector

When to prepare?

The report has to be prepared at the end of the each financial year.

When to submit the report?

Within 6 months from the end of the financial year.

Where to find the standard format?

According to the circular issued by SEBI dated 18^th April 2024, the reporting formal shall be hosted on the website of the AIF Associations, part of SFA within 2 working days of the issuance of the circular.

Exemption

• No fund raising:

If an AIF hasn’t raised any capital from investors, they do not need to file a PPM audit report, but must submit a CA certificate confirming this fact. 

• Angel Funds:

Angel Funds, as defined by SEBI regulations, are exempt from PPM audit requirements. 

• High investment threshold:

AIF schemes where each investor commits a minimum of INR 70 Crore are also not required to file a PPM audit report.