On a resolution under consideration, sixty investors remain silent. Thirty votes in favour. Ten votes against. Yet, the same resolution can produce three entirely different outcomes: 90% approval, 75% approval, or a failed proposal with only 30% support. The difference does not lie in the votes cast, but in the manner in which those votes are counted.

The answer may depend entirely on a single sentence contained in the fund’s placement memorandum, a sentence that most managers have never previously had to consider and were not required to address, but which SEBI now proposes to make a mandatory, disclosed and binding choice.

This article explains, in simple terms, the voting methodologies proposed by SEBI for obtaining investor consent under the AIF Regulations, the manner in which each methodology is proposed to operate, and why standardisation is being considered at this stage. We would welcome comments, questions and practical views from readers on this framework. You may write to us at: transactions@indiacp.com

Alternative Investment Funds are structured on the understanding that their investors are sophisticated enough to safeguard their own interests, and the regulatory framework is designed accordingly. Rather than regulating routine fund operations, the SEBI (Alternative Investment Funds) Regulations, 2012 (“AIF Regulations”) rely on the manager’s fiduciary obligations and investor consent mechanisms to address material decisions and conflicts of interest. The requirement for consent applies at different thresholds depending upon the nature of the decision involved.

A limited set of decisions require approval from two-thirds of investors by value, including a material alteration to the fund’s investment strategy or an extension of the tenure of a close-ended scheme. A broader range of matters requires approval from 75% of investors by value, including transactions involving associates of the manager or sponsor, appointment of undisclosed members to the investment committee, and in-specie distribution of assets during the liquidation period, among other matters.

However, this threshold framework does not appear to be based on any stated or identifiable principle. Matters of comparable significance, such as a change in fund strategy on one hand and investment in an associate on the other, are subject to different thresholds without any articulated basis for such distinction. In any event, the threshold only addresses one part of the issue: even a clearly prescribed percentage may lead to entirely different outcomes depending upon the manner in which votes are counted and how non-response is treated, an aspect that the AIF Regulations have not addressed until now.

SEBI’s consultation paper dated 30 June 2026 seeks to address this issue from two perspectives. First, it proposes harmonising the threshold itself by replacing the two-thirds requirement with a uniform 75% threshold wherever such requirement currently applies, on the basis that a higher threshold requires participation from a larger number of investors before a decision is considered approved and therefore operates in favour of minority investors. Second, it proposes, for the first time, standardising the manner in which such consent is sought, recorded and counted. This article focuses on the second aspect of the proposal.

The issue may appear technical, but it can determine the outcome: two funds applying the same 75% threshold, by value, to the same voting responses may arrive at different conclusions because one treats silence as consent while the other excludes it from the calculation. The consultation paper addresses this by providing managers with a structured choice among three prescribed voting methodologies, requiring them to select one, disclose it in the private placement memorandum (“PPM”), and apply it consistently. Public comments are open until 21 July 2026, and until the framework is notified, it remains a proposal and not law. The paper does not, however, resolve every issue arising from such choice, including whether the methodology applies to the fund or only the scheme, whether it can be adopted on a tiered basis, and what constitutes the relevant “value” for the purpose of calculation. These questions are considered towards the conclusion.

SEBI illustrates the three methods in the consultation paper with a single, deliberately simple example: a fund of 100 investors holding equal interests, on a proposal that attracts 30 votes in favour, 10 against, and 60 abstentions. The same vote, run through the three methods, produces approval of 90%, 75% or 30% respectively. That spread on identical facts drawn from SEBI’s own illustration, is the clearest possible demonstration of why the choice of method matters as much as the threshold itself. The table below unpacks each method in turn: how consent is counted, the outcome it produces, the fund profile it best suits, and the rationale, strength and key risk that follow from it.

The consultation paper does not prescribe a single correct method, and rightly so. The appropriate choice depends on the nature of the fund, the composition and responsiveness of its investor base, and the governance burden the fund is likely to carry.  A closely held fund with a handful of engaged institutional investors can comfortably adopt express voting; participation is rarely in doubt, and the higher protection costs it little. A fund with a broad, passive investor base may find deemed consent the only realistic way to function, accepting the governance trade-off that comes with converting silence into approval. Present and voting sits between the two, a familiar middle path for managers who want regulatory comfort, but do not want the bluntness of deemed consent or the execution risk of express approval.

The investment manager needs to understand that these methods are not merely a counting rule. It is a governance choice that must be capable of being disclosed, operated consistently, evidenced through records, and defended when the consent outcome matters.

The Conditions Attached to the Choice

Whichever method is chosen, the paper attaches conditions that matter as much as the methods themselves. The elected methodology must be disclosed in the private placement memorandum, together with the policy, procedures, timelines, communication modes, reminder framework, and associated risks. It must be applied consistently to every investor in the scheme. This is intended to end the practice, which SEBI has identified and plainly disapproves of, of applying one consent methodology to the general investor base while giving select investors bespoke voting treatment.

Every investor must be given a genuine opportunity to vote on each proposal, with clear disclosure of the proposal, its rationale, the provision that triggered the consent requirement, the applicable threshold, and the treatment of non-response or abstention. The manager must maintain records of all notices, reminders, meetings, queries, responses, and votes. Existing schemes are grandfathered to the extent of their current methodology, and the new regime is proposed to apply prospectively.

Closing Thoughts

SEBI’s proposal moves on two fronts: it seeks to harmonise the threshold at 75%, and it seeks to standardise how consent is calculated, requiring managers to disclose their chosen methodology in the PPM. This piece has focused on the second, which leaves the industry with more than a choice between three voting methodologies. It asks a more fundamental question: how should investor consent be built into the governance architecture of an AIF?

That question matters because investor consent is rarely tested in calm conditions. It is usually sought when the fund needs to take a consequential step: approve a related party transaction, extend the life of a scheme, or implement a commercially time-sensitive decision. In those situations, the voting methodology will not remain a procedural clause in the PPM. It will become the basis on which the manager demonstrates investor mandate, or the point on which the decision is later challenged.

This is where several practical questions remain open, and they are worth stating plainly. The methodology is to be disclosed in the PPM and applied uniformly across the scheme, but a fund may run several schemes, and the paper does not say whether that uniformity is owed at the fund level or only within each scheme.

Can a fund adopt different consent methodologies for different schemes under the same fund, or must a single methodology apply uniformly across the fund?

Nor is it clear that the choice must be static.

Can a fund use different methodologies for different resolutions, or must one methodology apply to every matter requiring consent?

The threshold is expressed by value, but value itself is left undefined.

If approval is to be measured by value, what value is relevant: commitment, contribution, or any other metric?

And the fund’s own legal form may cut across the choice altogether. An AIF set up as a company carries the voting machinery of the Companies Act, 2013, which does not offer members the latitude this consultation paper contemplates.

Where an AIF is constituted as a company rather than a trust, how would the voting methodology proposed in the paper reconcile with the statutory voting regime under the Companies Act, 2013?

These are not academic distinctions. In a closely held fund, they can decide the outcome.

The practical point for managers is therefore clear. The voting methodology should not be selected merely by asking which route makes approvals easiest. That is a narrow and potentially dangerous test. The better question is which methodology the manager can operate consistently and defend if the decision is later reviewed by investors.

For investors, the implication is equally direct: silence will no longer carry an undefined or inconsistent effect. Depending on the methodology disclosed in the PPM, silence may count as consent, may be excluded from the calculation, or may make approval harder to achieve. That, in the end, is what this proposal is really about: giving silence a defined legal effect, disclosed upfront, rather than leaving it to be argued over after the fact.