SEBI Announces Modes For Venture Capital Funds To Migrate To Alternative Funds
They must submit an original registration certificate and specific information as outlined by the regulator
By: : Ajay Singh
Update: 2024-08-21 05:00 GMT
SEBI Announces Modes For Venture Capital Funds To Migrate To Alternative Funds
They must submit an original registration certificate and specific information as outlined by the regulator
The Securities and Exchange Board of India (SEBI) has introduced the process and conditions for Venture Capital Funds (VCFs) for migrating to the Alternative Investment Funds (AIF) rules.
In July, the markets regulator permitted VCFs, registered before the introduction of AIF regulations, to transition to the current rules by becoming Migrated Venture Capital Funds (MVCFs).
The MVCF transitions to a sub-category of VCF under Category I - Alternative Investment Fund as per the AIF norms. The VCFs wishing to migrate must submit their original registration certificate and specific information as outlined by the regulator.
The SEBI circular stated that VCFs could choose to migrate to AIF Regulations to handle unliquidated investments after the tenure of the scheme ends. The option will be available until 19 July 2025.
Regarding the conditions for VCFs with active schemes, SEBI directed that if the liquidation period has not expired, they can migrate with the scheme's tenure continuing as originally disclosed or determined with the approval of the investor.
If the liquidation period has expired, they must not have any unresolved investor complaints and will get an extra year (until 19 July 2025) to liquidate.
On post-migration considerations, the regulator explained that existing investors, investments, and units will be transferred under the AIF Regulations.
For VCFs not opting for migration, SEBI has ruled that with active schemes, they will face stricter reporting requirements and with expired schemes, the VCFs may face regulatory action.
The circular read, "The schemes of VCFs, whose liquidation period (in terms of Regulation 24(2) of SEBI’s VCF Regulations, 1996) has not expired, shall be subject to enhanced regulatory reporting, in line with the regulatory reporting applicable to AIFs under AIF Regulations.”
It added, "The VCFs having at least one scheme whose liquidation period (in terms of Regulation 24(2) of VCF Regulations) has expired, shall be subject to appropriate regulatory action for continuing beyond the expiry of their original liquidation period."
Meanwhile, VCFs that have wound up all schemes or have not made any new investments, would have to surrender their registration by 31 March 2025.