India: Alternative Investment / Venture Capital Funds: SEBI Regulations

Source: www.sebi.gov.in

Investment has always been a lucrative scheme for the businesspersons to enhance their earnings among various modes, including direct equity, mutual funds, gold, real estate, fixed deposits, etc. Investments may be made individually or in a group.

Alternative Investment Funds:

One of the means of investments done collectively are through Alternative Investment Funds (hereinafter referred to as “AIF”) meaning any funds established or incorporated in India which is a privately pooled investment vehicle which collects funds from sophisticated investors. These investors may be whether Indian or foreigner, for investing it in accordance with a defined investment policy for the benefit of its investors. The AIF in India is regulated by the Securities Exchange Board of India (hereinafter referred to as “SEBI”), under the provisions of SEBI (Alternative Investment Funds) Regulations, 2012 (“AIF Regulations”) issued on May 21, 2012.

With a recent SEBI circular on Overseas Investment by Alternative Investment Funds (AIFs) / Venture Capital Funds (VCFs) (hereinafter referred to as “the SEBI notification”) dated July 3, 2018, allowing overseas investment by AIFs and VCFs to the extent of USD 750 million taking a leap from the earlier limit of USD 500 million.

Venture Capital Funds

Another means of joint investment are Venture Capital Funds (hereinafter referred to as “VCF”) which are funds established in the form of a trust or a company including a body corporate having a dedicated pool of capital. SEBI controls such transactions in accordance with the aid of the SEBI (Venture Capital Funds) Regulations, 1996.

The SEBI circular also mandated the disclosure of the below stated details, by AIF/ VCF, in order to monitor the utilization of overseas investment limits-

1.      Reporting the utilization of the overseas limits within 5 working days of such utilization on SEBI intermediary portal at https://siportal.sebi.gov.in .

2.      Reporting of the following information through SEBI intermediary portal:

• In case an AIF / VCF has not utilized the overseas limit granted to them within a period of 6 months from the date of SEBI approval (hereinafter referred to as ‘validity period’), the same shall be reported within 2 working days after expiry of the validity period;
• In case an AIF / VCF has not utilized as a part of the overseas limit within the validity period, the same shall be reported within 2 working days after expiry of the validity period;
• In case an AIF/ VCF wishes to surrender the overseas limit at any point of time within the validity period, the same shall be reported within 2 working days from the date of decision to surrender the limit.

With the introduction of the SEBI circular SEBI not only aims to protect the interests of investors in securities market but also to promote the development and regulation of the securities market in India.