n NISM Certifications
X NISM Series X
Medium

The 'Liquidation Preference' of an AIF gives it the right to receive proceeds before other shareholders during liquidation, ensuring priority in realizing returns on its investment.

Practice question from NISM Series XIX A- Alternative Investments Funds (AIF) Distributors Mock Test 5 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    Enforce liquidation of investee

  2. Get preference in liquidation proceeds

    Correct answer

  3. C

    Convert preference shares into equity in liquidation

  4. D

    Liquidate without winding up

Why this is the answer

Liquidation preference ensures the AIF receives a specified amount before other shareholders in case of asset liquidation.

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