Panellists urge regulatory fixes for India continuation funds

TL;DR

Panellists at VCCircle LP Summit called for fixing regulatory hurdles in India's continuation funds.[[1]](https://www.vccircle.com/mustresolve-regulatory-issues-for-continuation-funds-panellists-at-vccircle-lp-summit)
Key issues include tax implications, asset valuation, and need for uniform SEBI framework.[[2]](https://www.linkedin.com/posts/trilegal_must-resolve-regulatory-issues-for-continuation-activity-7165964978817077248-5jjg)
Funds stuck past tenure trap LP capital, making continuation vehicles vital for liquidity amid slow exits.[[3]](https://events.mosaicdigital.com/event/limited-partners-summit-feb2024)

The story at a glance

Panellists Pallabi Ghosal of Trilegal and Sumesh Girhotra of the British High Commission discussed continuation funds at VCCircle's India Limited Partner Summit in February 2024. They stressed resolving regulatory gaps under SEBI to enable these vehicles for extending mature assets. The article reports this amid slow PE exits in India, where many funds exceed tenures and lock LP money.[[1]](https://www.vccircle.com/mustresolve-regulatory-issues-for-continuation-funds-panellists-at-vccircle-lp-summit)[[2]](https://www.linkedin.com/posts/trilegal_must-resolve-regulatory-issues-for-continuation-activity-7165964978817077248-5jjg)[[3]](https://events.mosaicdigital.com/event/limited-partners-summit-feb2024)

Key points

Continuation funds let GPs transfer promising assets from ageing funds to new vehicles, providing liquidity to exiting LPs via cash or rollover options.[[4]](https://www.ey.com/content/dam/ey-unified-site/ey-com/en-in/insights/strategy-transactions/documents/2026/ey-private-credit-in-india-h2-2025-update.pdf)
In India, ageing funds past their lives hold stuck LP capital, with continuation funds seen as a way to "clean the shelves."[[3]](https://events.mosaicdigital.com/event/limited-partners-summit-feb2024)
Pallabi Ghosal highlighted tax implications and asset valuation concerns needing a uniform regulatory framework from SEBI.[[2]](https://www.linkedin.com/posts/trilegal_must-resolve-regulatory-issues-for-continuation-activity-7165964978817077248-5jjg)
SEBI has taken steps like allowing in-specie transfers with 75% LP consent, but panellists say more resolution is required for conflicts and governance.[[5]](https://natlawreview.com/article/sebi-approves-five-aif-reforms)
Panel framed continuation funds alongside platforms and search funds as potential mainstream strategies for PE liquidity in tough exit markets.[[3]](https://events.mosaicdigital.com/event/limited-partners-summit-feb2024)

Details and context

The VCCircle article covers a panel at the LP Summit where experts addressed continuation funds amid India's PE challenges: prolonged fund lives and limited exits like IPOs or sales. Continuation vehicles, GP-led secondaries, buy assets from legacy funds, reset timelines, and attract new capital—common globally but nascent in India due to regulatory friction.[[4]](https://www.ey.com/content/dam/ey-unified-site/ey-com/en-in/insights/strategy-transactions/documents/2026/ey-private-credit-in-india-h2-2025-update.pdf)

SEBI's 2023 AIF reforms permit carrying unliquidated investments to new schemes with majority LP approval or in-specie distribution, but panellists noted gaps in handling valuation fairness, tax treatment, and GP-LP conflicts—issues regulators worldwide scrutinise.[[5]](https://natlawreview.com/article/sebi-approves-five-aif-reforms)[[6]](https://cdn.hl.com/pdf/2025/2024-continuation-fund-study.pdf)

This fits broader trends: India's AIF commitments hit Rs 13 trillion by early 2026, with continuation funds gaining traction for liquidity without forced sales.[[7]](https://www.linkedin.com/posts/hozefa-ganjifrockwala_alternative-investment-funds-aifs-in-india-activity-7418870212164399104-fqtC)

Key quotes

Pallabi Ghosal, Partner, Trilegal: Emphasised "the importance of addressing tax implications and asset valuation concerns within a uniform framework."[[2]](https://www.linkedin.com/posts/trilegal_must-resolve-regulatory-issues-for-continuation-activity-7165964978817077248-5jjg)

Why it matters

Regulatory clarity for continuation funds could unlock billions in stuck PE capital, boosting India's maturing alternatives market. GPs and LPs gain better liquidity tools amid volatile exits, while investors avoid discounted sales of strong assets. Watch SEBI consultations or AIF amendments, though full framework may take time given global scrutiny on conflicts.[[6]](https://cdn.hl.com/pdf/2025/2024-continuation-fund-study.pdf)