A fund is capital raised on terms, and in India those terms are written twice: once in the constitutional documents and once in the SEBI (Alternative Investment Funds) Regulations. Category selection and registration, the private placement memorandum in the standard template and the annual PPM audit, sponsor commitment and continuing interest, the mandate that rights be held pro rata and pari passu and the narrow room left for differential treatment, dematerialisation of units, the specific due diligence now required on investors and on investments, valuation norms and the discipline around a change in methodology, tenure extension and the dissolution period and the liquidation scheme that replaced in specie distribution, co-investment through separate vehicles, accredited investors and large value funds for Category I and II and the entity level position for Category III, investment by non-residents under Schedule VIII of the FEMA rules and the downstream consequence where the sponsor or manager is not owned and controlled by residents, and the parallel route through an IFSC fund management entity. The regime has been rewritten in pieces over the last three years and continues to be.

Be it launching a first fund and choosing between a domestic trust and a GIFT City structure, negotiating an anchor investor's side letter against the pari passu mandate, deploying into a growth round and holding the liquidation preference, drag and tag and reserved matters that were actually bargained for, restructuring carry across a manager and its team, handling an LP transfer or a defaulting contributor, or taking a scheme past its tenure into liquidation, the questions reduce to three: does the disclosure hold, does the right hold, does the tax position hold.

Fund formation and fund deployment sit in the same team. The lawyer who drafts the placement memorandum is the lawyer who negotiates the shareholders' agreement, which is why the strategy a fund has disclosed and the rights it actually takes at portfolio level do not drift apart, and why a rights package that would not survive a pari passu reading is caught at term sheet rather than at audit. Where a portfolio company sits in a regulated sector, the diligence is run by lawyers who read the licence conditions themselves.