Mutual Funds 75-percent-rule-unitholder

75% rule for unitholder approval

From WebNotes, a public knowledge base. Last updated 19 May 2026. Reading time ~4 min.

The 75% rule is the SEBI-mandated unitholder approval threshold for material changes to mutual fund schemes. Any change in fundamental scheme attributes (e.g., scheme merger, conversion to different category, wind-up, fundamental change in investment strategy) requires 75% of unit value to consent before the change can proceed.

Framework

Statutory basis

Per SEBI (Mutual Funds) Regulations 1996 :

Material changes require 75% by value (not by headcount) of unit holders to consent.
Approval mechanism: voting / ballot.
Trustee company supervises the process.

What counts as material

Scheme merger or conversion .
Change in fundamental investment strategy.
Change in scheme category.
Scheme wind-up (e.g., Franklin Templeton April 2020 ).

Routine changes excluded

Fund manager change.
TER change within SEBI caps.
Operational policy refinements.

Operational mechanics

Notification

AMC publishes addendum to SID.
Notifies unit holders via email + postal.
30-day notification window.

Voting

Postal ballot or electronic vote.
75% by value threshold (not headcount).
Smaller unitholders’ total weight matters.

Investors who do not vote typically deemed to consent.
Active dissent requires explicit no-vote.

Notable cases

Franklin Templeton April 2020 wind-up : The trustee initially attempted unit-holder approval; the Supreme Court eventually authorised the wind-up.
Multi-cap reclassification (2020) : Most multi-cap schemes migrated to Flexicap; the 75% threshold typically met by default in subsequent voting.

Investor implications

Voting matters; active participation can influence outcomes.
Material changes typically meet 75% threshold (small dissent is normal).
Exit-load-free redemption window provides alternative if disagree.

External references

References

SEBI (Mutual Funds) Regulations 1996.
AMFI Best Practice Guidelines.

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WebNotes Editorial Team

The WebNotes Editorial Team covers Indian capital markets, payments infrastructure and retail investor procedures. Every article is fact-checked against primary sources, principally SEBI circulars and master directions, NPCI specifications and the official support documentation published by the intermediary in question. Drafts go through a second-pair-of-eyes review and a separate compliance read before publication, and revisions are tracked against the SEBI and NPCI rule changes referenced in the methodology section.

Last reviewed: 19 May 2026
Conflicts of interest: WebNotes is independent. No relationship with any broker, registrar or bank named in this article.