When a mutual fund company is sold or closed down, it becomes a matter of serious concern for any existing investor. Since Mutual Funds are regulated by SEBI, procedures are also laid down to deal with such possibilities.
In case of winding up of a mutual fund company, the trustees of the fund can send a proposal for winding up to SEBI and get their approval or SEBI itself can direct the fund for winding up. In these situations, the amount is returned to the investors based on the last available Net Asset Value (NAV) before closing.
If the mutual fund is being authorized by another mutual fund institution, then there are two options. One, the scheme continues as it was originally designed, only now being overseen by a new institution. Or, the schemes acquired are merged with the schemes of the new fund institution. SEBI approval is mandatory for mergers and acquisitions and scheme level mergers for Sub Asset Management Companies (AMCs).
In all these situations, all investors are given the option to exit the scheme without bearing any burden. Every action taken by the fund institution or investor is at the prevailing Net Asset Value.