SEBI amends angel fund regulations, permits 200 investors to be in one scheme

Announcing amendments to SEBI (Alternative Investment Funds) Regulations, 2012 regarding Angel Funds, the market regulator on Wednesday said it is increasing the upper limit for number of angel investors in a scheme from 49 to 200 even as it harmonized the definition of a startup with that used by DIPP in the startup policy.

In order to further develop the alternative investment industry and the startup ecosystem in India, SEBI, in March 2015, constituted a Committee of experts drawn from the across market participants called the “Alternative Investment Policy Advisory Committee” (“AIPAC”) under the chairmanship of NR Narayana Murthy.

AIPAC had submitted its report to SEBI with various recommendations including certain recommendations relating to Angel Funds. Considering the recommendations in the report and public comments thereon, the SEBI Board has approved following amendments:

i. The upper limit for number of angel investors in a scheme is increased from forty nine to two hundred.
ii) The definition of startup for Angel Funds investments will be similar to definition of DIPP as given in their startup policy. Accordingly, Angel Funds will be allowed to invest in startups incorporated within five years, which was earlier three years.
iii) The requirements of minimum investment amount by an Angel Fund in any venture capital undertaking is reduced from Rs. 50 lakh to Rs. 25 lakh.

iv) The lock-in requirements of investment made by Angel Funds in the venture capital undertaking is reduced from three years to one year.
v) Angel Funds are allowed to invest in overseas venture capital undertakings upto 25% of their investible corpus in line with other AIFs

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