| Alternative_Investment_Funds_Jan08_2021 |
| 3 (1) On and from the commencement of these regulations, no entity or person shall act as an Alternative Investment Fund unless it has obtained a certificate of registration from the Board : Provided that an existing fund falling within the definition of Alternative Investment Fund which is not registered with the Board may continue to operate for a period of six months from commencement of these regulations or if it has made an application for registration under sub-regulation (5) within the said period of six months, till the disposal of such application: to the substitution, it read as “Companies Act, 1956 (1 of 1956)”. Provided further that the Board may, in special cases, extend the said period up to a maximum of twelve months from the date of such commencement: Provided further that existing schemes will be allowed to complete their agreed tenure, such funds shall not raise any fresh monies other than commitments already made till registration is granted under regulation 6: 11[Provided further that such existing funds, which do not propose to accept any fresh commitments after commencement of these regulations shall not be required to obtain registration under these regulations subject to submission of information on their activities to the Board in the manner as may be specified] Provided further that if such existing funds are not able to comply with conditions specified under these regulations, they may apply for exemption to the Board from strict compliance with these regulations and the Board upon examination may provide such exemptions or issue such instructions as may be deemed appropriate. |
| 3 (2) The funds registered as venture capital fund under Securities and Exchange Board of India (Venture Capital Funds) Regulations, 1996 shall continue to be regulated by the said regulations till the existing fund or scheme managed by the fund is wound up and such funds shall not launch any new scheme after notification of these regulations: Provided that the existing fund or scheme shall not increase the targeted corpus of the fund or scheme after notification of these regulations. Provided further that venture capital funds may seek re-registration under these regulations subject to approval of two-thirds of their investors by value of theirinvestment. |
| 3 (3) Any entity referred to in sub-regulation (1) who fails to make an application for grant of a certificate within the period specified therein shall cease to carry on any activity as an Alternative Investment Fund . |
| 3 (4) Alternative Investment Funds shall seek registration in one of the categories mentioned hereunder and in case of Category I Alternative Investment Fund, in one of the sub- categories thereof:(a) “Category I Alternative Investment Fund” which invests in start-up or early stageventures or social ventures or SMEs or infrastructure or other sectors or areas whichthe government or regulators consider as socially or economically desirable andshall include venture capital funds, SME Funds, social venture funds, infrastructurefunds and such other Alternative Investment Funds as may be specified;are generally perceived to have positive spillover effects on economy and for whichthe Board or Government of India or other regulators in India might considerproviding incentives or concessions shall be included and such funds which areformed as trusts or companies shall be construed as “venture capital company” or“venture capital fund” as specified under sub-section (23FB) of Section 10 of theIncome Tax Act, 1961.(b) “Category II Alternative Investment Fund” which does not fall in Category I andIII and which does not undertake leverage or borrowing other than to meet day-to-day operational requirements and as permitted in these regulations;as private equity funds or debt funds for which no specific incentives or concessionsare given by the government or any other Regulator shall be included .(c) “Category III Alternative Investment Fund” which employs diverse or complextrading strategies and may employ leverage including through investment in listedor unlisted derivatives.as hedge funds or funds which trade with a view to make short term returns or suchother funds which are open ended and for which no specific incentives orconcessions are given by the government or any other Regulator shall be included . |
| 3 (5) An application for grant of certificate shall be made for any of the categories as specified in sub-regulation (4) in Form A as specified in the First Schedule to these regulations and shall be accompanied by a non-refundable application fee as specified in Part A of the Second Schedule to these regulations to be paid in the manner specified in Part B thereof. |
| 3 (6) The Board shall take into account requirements as specified in these regulations for the purpose of considering grant of registration. |
| 3 (7) Without prejudice to the powers of the Board to take any action under the Act or regulations made there under, the certificate of registration shall be valid till the Alternative Investment Fund is wound up. |
| 3 (8) The Board may, in the interest of the investors, issue directions with regard to the transfer of records, documents or securities or disposal of investments relating to its activities as an Alternative Investment Fund . |
| 3 (9) The Board may, in order to protect the interests of investors , appoint any person to take charge of records , documents, securities and for this purpose, also determine the terms |
| 4 For the purpose of the grant of certificate to an applicant , the Board shall consider the following conditions for eligibility, namely, —(a)the memorandum of association in case of a company; or the Trust Deed in case ofa Trust; or the Partnership deed in case of a limited liability partnership permits itto carry on the activity of an Alternative Investment Fund;(b)the applicant is prohibited by its memorandum and articles of association or trustdeed or partnership deed from making an invitation to the public to subscribe to its securities ;(c)in case the applicant is a Trust, the instrument of trust is in the form of a deed andhas been duly registered under the provisions of the Registration Act, 1908;(d)in case the applicant is a limited liability partnership, the partnership is dulyincorporated and the partnership deed has been duly filed with the Registrar underthe provisions of the Limited Liability Partnership Act, 2008;(e)in case the applicant is a body corporate, it is set up or established under the lawsof the Central or State Legislature and is permitted to carry on the activities of anAlternative Investment Fund;(f)the applicant , Sponsor and Manager are fit and proper persons based on the criteriaspecified in Schedule II of the Securities and Exchange Board of India(Intermediaries) Regulations, 2008;(g)12[The key investment team of the Manager of Alternative Investment Fund has -(i)adequate experience, with at least one key personnel having not lessthan five years of experience in advising or managing pools of capitalor in fund or asset or wealth or portfolio management or in thebusiness of buying, selling and dealing of securities or other financialassets; and(ii) at least one key personnel with professional qualification in finance,accountancy, business management, commerce, economics, capitalmarket or banking from a university or an institution recognized bythe Central Government or any State Government or a foreignuniversity, or a CFA charter from the CFA institute or any otherqualification as may be specified by the Board :Provided that the requirements of experience and professionalqualification as specified in regulation 4(g)(i) and 4(g)(ii) may also befulfilled by the same key personnel.]2020 w.e.f 19-10-2020. Prior to its substitution, clause (g) read as follows;“(g) the key investment team of the Manager of Alternative Investment Fund has adequate experience, with at leastone key personnel having not less than five years experience in advising or managing pools of capital or in fund orasset or wealth or portfolio management or in the business of buying, selling and dealing of securities or other financialassets and has relevant professional qualification;”(h)the Manager or Sponsor has the necessary infrastructure and manpower toeffectively discharge its activities;(i)the applicant has clearly described at the time of registration the investmentobjective, the targeted investors, proposed corpus, investment style or strategy andproposed tenure of the fund or scheme;(j) whether the applicant or any entity established by the Sponsor or Manager has |
| 5 (1) The Board may require the applicant to furnish any such further information or clarification regarding the Sponsor or Manager or nature of the fund or fund management activities or any such matter connected thereto to consider the application for grant of a certificate or after registration thereon. |
| 5 (2) If required by the Board, the applicant or Sponsor or Manager shall appear before the Board for personal representation. |
| 6 (1) The Board may grant certificate under any specific category of Alternative Investment Fund, if it is satisfied that the applicant fulfills the requirements as specified in theseregulations. |
| 6 (2) The Board shall, on receipt of the registration fee as specified in the Second Schedule, grant a certificate of registration in Form B. |
| 6 (3) The registration may be granted with such conditions as may be deemed appropriate by the Board. 13[(4) The Board may, on being satisfied that the applicant complies with the provisions of regulation 4 except those of clause (c) or clause (d) thereof, as the case may be, grant an in- principle approval to the applicant : Provided that the applicant shall comply with clause (c) or clause (d) of regulation 4, as the case may be, within six months from the date of grant of in-principle approval and upon compliance with the same, the Board may grant a certificate of registration under sub- regulation (2). |
| 6 (5) An Alternative Investment Fund that has been granted in-principle approval may accept commitments from investors but shall not accept any monies till it is granted registration under |
| 7 (1) The certificate granted under regulation 6 shall, inter-alia, be subject to the following conditions:-(a)the Alternative Investment Fund shall abide by the provisions of the Act and theseregulations;(b)the Alternative Investment Fund shall not carry on any other activity other thanpermitted activities;(c)the Alternative Investment Fund shall forthwith inform the Board in writing, if anyinformation or particulars previously submitted to the Board are found to be falseor misleading in any material particular or if there is any material change in theinformation already submitted. |
| 7 (2) An Alternative Investment Fund which has been granted registration under a particular category cannot change its category subsequent to registration, except with the approval of |
| 8 (1) After considering an application made under regulation 3, if the Board is of the opinion that a certificate should not be granted, it may reject the application after giving the applicant a reasonable opportunity of being heard. |
| 8 (2) The decision of the Board to reject the application shall be communicated to the applicant within thirty days. |
| 8 (3) Where an application for a certificate is rejected by the Board , the applicant shall cease to carry on any activity as an Alternative Investment Fund : Provided that nothing contained in these regulations shall affect the liability of the |
| 9 (1) All Alternative Investment Funds shall state investment strategy, investment purpose and its investment methodology in its placement memorandum to the investors . |
| 9 (2) Any material alteration to the fund strategy shall be made with the consent of atleast two- thirds of unit holders by value of their investment in the Alternative Investment Fund . |
| 10 Investment in all categories of Alternative Investment Funds shall be subject to the following conditions:-(a) the Alternative Investment Fund may raise funds from any investor whether Indian,foreign or non-resident Indians by way of issue of units;(b) each scheme of the Alternative Investment Fund shall have corpus of atleast twenty crorerupees;(c) the Alternative Investment Fund shall not accept from an investor , an investment of valueless than one crore rupees:Provided that in case of investor s who are employees or directors of the AlternativeInvestment Fund or employees or directors of the Manager, the minimum value ofinvestment shall be twenty five lakh rupees.(d) the Manager or Sponsor shall have a continuing interest in the Alternative InvestmentFund of not less than two and half percent of the corpus or five crore rupees, whichever islower, in the form of investment in the Alternative Investment Fund and such interestshall not be through the waiver of management fees:Provided that for Category III Alternative Investment Fund, the continuing interest shallbe not less than five percent of the corpus or ten crore rupees, whichever is lower.(e) the Manager or Sponsor shall disclose their investment in the Alternative InvestmentFund to the investor s of the Alternative Investment Fund;(f) no scheme of the Alternative Investment Fund shall have more than one thousand investor s14[:]15[Provided that the provisions of the 16[Companies Act, 2013] shall apply to theAlternative Investment Fund, if it is formed as a company.](g) the fund shall not solicit or collect funds except by way of private placement. |
| 11 (1)Alternative Investment Fund shall raise funds through private placement by issue of information memorandum or placement memorandum , by whatever name called. |
| 11 (2) Such information or placement memorandum as specified in sub-regulation (1) shall contain all material information about the Alternative Investment Fund and the Manager, background of key investment team of the Manager, targeted investors, fees and all other expenses proposed to be charged, tenure of the Alternative Investment Fund or scheme, conditions or limits on redemption, investment strategy, risk management tools and parameters employed, key service providers, conflict of interest and procedures to identify and address them, disciplinary history, the terms and conditions on which the Manager offers investment services, its affiliations with other intermediaries, manner of winding up of the Alternative Investment Fund or the scheme and such other information as may be necessary for the investor to take an informed decision on whether to invest in the Alternative Investment Fund. symbol “;” to the substitution, it read as “Companies Act, 1956”. |
| 12 (1) The Alternative Investment Fund may launch schemes subject to filing of placement memorandum with the Board. |
| 12 (2) Such placement memorandum shall be filed with the Board atleast thirty days prior to launch of scheme along with the fees as specified in the Second Schedule: Provided that payment of scheme fees shall not apply in case of launch of first scheme by the Alternative Investment Fund . |
| 12 (3) The Board may communicate its comments, if any, to the applicant prior to launch of the scheme and the applicant shall incorporate the comments in placement memorandum prior to launch of scheme. |
| 13 (1) Category I Alternative Investment Fund and Category II Alternative Investment Fund shall be close ended and the tenure of fund or scheme shall be determined at the time of application subject to sub-regulation (2) of this regulation. |
| 13 (2) Category I and II Alternative Investment Fund or schemes launched by such funds shall have a minimum tenure of three years. |
| 13 (3) Category III Alternative Investment Fund may be open ended or close ended. |
| 13 (4) Extension of the tenure of the close ended Alternative Investment Fund may be permitted up to two years subject to approval of two-thirds of the unit holders by value of their investment in the Alternative Investment Fund . |
| 13 (5) In the absence of consent of unit holders, the Alternative Investment Fund shall fully liquidate within one year following expiration of the fund tenure or extended tenure. |
| 14 (1) Units of close ended Alternative Investment Fund may be listed on stock exchange subject to a minimum tradable lot of one crore rupees. |
| 14 (2) Listing of Alternative Investment Fund units shall be permitted only after final close of the fund or scheme. |
| 15 (1) Investments by all categories of Alternative Investment Funds shall be subject to the following conditions:-(a) Alternative Investment Fund may invest in securities of companies incorporatedoutside India subject to such conditions or guidelines that may be stipulated or issuedby the Reserve Bank of India and the Board from time to time;(b) Co-investment in an investee company by a Manager or Sponsor shall not be on termsmore favourable than those offered to the Alternative Investment Fund;(c) Category I and II Alternative Investment Funds shall invest not more than twenty fivepercent of the 17[investable funds] in one Investee Company;(d) Category III Alternative Investment Fund shall invest not more than ten percent of the18[investable funds] in one Investee Company(e) Alternative Investment Fund shall not invest in associates except with the approval ofseventy five percent of investors by value of their investment in the AlternativeInvestment Fund;(f) Un-invested portion of the 19[investable funds] may be invested in liquid mutual fundsor bank deposits or other liquid assets of higher quality such as Treasury bills, CBLOs,Commercial Papers, Certificates of Deposits, etc. till deployment of funds as per theinvestment objective;(g) Alternative Investment Fund may act as Nominated Investor as specified in clause (b)of sub-regulation (1) of regulation 106N of the Securities and Exchange Board of India(Issue of Capital and Disclosure Requirements) Regulations, 2009.20[(h) Investment by Category I and Category II Alternative Investment Funds in theshares of entities listed on institutional trading platform after the commencement ofSecurities and Exchange Board of India (Issue of Capital and Disclosure Requirements)word “corpus”18 Ibid19 Ibid(Fourth Amendment) Regulations, 2015 shall be deemed to be investment in ‘unlistedsecurities’ for the purpose of these regulations .] |
| 15 (2) Notwithstanding the conditions as specified in sub-regulation (1), the Board may specify additional requirements or criteria for Alternative Investment Funds or for a specific |
| 16 (1) The following investment conditions shall apply to all Category I Alternative Investment Funds:-(a) Category I Alternative Investment Fund shall invest in investee companies or venturecapital undertaking or in special purpose vehicles or in limited liability partnershipsor in units of other Alternative Investment Funds as specified in these regulations;(b) Fund of Category I Alternative Investment Funds may invest in units of Category IAlternative Investment Funds of same sub-category:Provided that they shall only invest in such units and shall not invest in units of otherFund of Funds:Provided further that the investment conditions as specified in sub-regulations (2),(3), (4) or (5) shall not be applicable to investments by such funds.(c) Category I Alternative Investment Funds shall not borrow funds directly or indirectlyor engage in any leverage except for meeting temporary funding requirements for notmore than thirty days, on not more than four occasions in a year and not more than tenpercent of the 21[investable funds]. |
| 16 (2) The following investment conditions shall apply to venture capital funds in addition to conditions laid down in sub-regulation (1):- word “corpus”(a) at least two-thirds of the 22[investable funds] shall be invested in unlisted equity sharesor equity linked instruments of a venture capital undertaking or in companies listed orproposed to be listed on a SME exchange or SME segment of an exchange;(b) not more than one-third of the 23[investable funds] shall be invested in:(i)subscription to initial public offer of a venture capital undertaking whose sharesare proposed to be listed;(ii)debt or debt instrument of a venture capital undertaking in which the fund hasalready made an investment by way of equity or contribution towardspartnership interest;(iii) preferential allotment, including through qualified institutional placement, ofequity shares or equity linked instruments of a listed company subject to lockin period of one year;(iv)the equity shares or equity linked instruments of a financially weak company ora sick industrial company whose shares are listed. company ” means a company , which has at the end of the previous financial yearaccumulated losses, which has resulted in erosion of more than fifty percent butless than hundred percent of its net worth as at the beginning of the previousfinancial year.(v)special purpose vehicles which are created by the fund for the purpose offacilitating or promoting investment in accordance with these regulations:Provided that the investment conditions and restrictions stipulated in clause (a) andclause (b) of sub-regulation (2) shall be achieved by the fund by the end of its lifecycle.(c) such funds may enter into an agreement with merchant banker to subscribe to theunsubscribed portion of the issue or to receive or deliver securities in the process of22 Ibid.word “corpus”market making under Chapter XB of the Securities and Exchange Board of India(Issue of Capital and Disclosure Requirements) Regulations, 2009 and the provisionsof clause (a) and clause (b) of sub-regulation (2) shall not apply in case of acquisitionor sale of securities pursuant to such subscription or market making.(d) such funds shall be exempt from regulation 3 and 3A of Securities and ExchangeBoard of India (Prohibition of Insider Trading) Regulations, 1992 in respect ofinvestment in companies listed on SME Exchange or SME segment of an exchangepursuant to due diligence of such companies subject to the following conditions:(i)the fund shall disclose any acquisition or dealing in securities pursuant to suchdue-diligence , within two working days of such acquisition or dealing, to thestock exchanges where the investee company is listed;(ii)such investment shall be locked in for a period of one year from the date ofinvestment. |
| 16 (3) The following conditions shall apply to SME Funds in addition to conditions laid down in sub-regulation (1):-(a) atleast seventy five percent of the 24[investable funds] shall be invested in unlisted securities or partnership interest of venture capital undertakings or investee companies which are SMEs or in companies listed or proposed to be listed on SME exchange orSME segment of an exchange;(b) such funds may enter into an agreement with merchant banker to subscribe to theunsubscribed portion of the issue or to receive or deliver securities in the process ofmarket making under Chapter XB of the Securities and Exchange Board of India(Issue of Capital and Disclosure Requirements) Regulations, 2009;(c) such funds shall be exempt from regulation 3 and 3A of Securities and ExchangeBoard of India (Prohibition of Insider Trading) Regulations, 1992 in respect ofinvestment in companies listed on SME Exchange or SME segment of an exchangepursuant to due diligence of such companies subject to the following conditions:word “corpus”(i)the fund shall disclose any acquisition or dealing in securities pursuant to suchdue-diligence , within two working days of such acquisition or dealing, to thestock exchanges where the investee company is listed;(ii)such investment shall be locked in for a period of one year from the date ofinvestment. |
| 16 (4) The following conditions shall apply to social venture funds in addition to the conditions laid down in sub-regulation (1):-(a) atleast seventy five percent of the 25[investable funds] shall be invested in unlistedsecurities or partnership interest of social ventures.(b) such funds may accept grants, provided that such utilization of such grants shall berestricted to clause (a)26[:]27[Provided that the amount of grant that may be accepted by the fund from anyperson shall not be less than twenty-five lakh rupees:Provided further that no profits or gains shall accrue to the provider of suchgrants.](c) such funds may give grants to social ventures, provided that appropriate disclosure ismade in the placement memorandum.(d) such funds may accept muted returns for their investors i.e. they may accept returnson their investments which may be lower than prevailing returns for similarinvestments. |
| 16 (5) The following conditions shall apply to Infrastructure Funds in addition to conditions laid down in sub-regulation (1):-(a) atleast seventy five percent of the 28[investable funds] shall be invested in unlistedsecurities or units or partnership interest of venture capital undertaking or investeeword “corpus”symbol “ .”.word “corpus”companies or special purpose vehicles, which are engaged in or formed for the purposeof operating, developing or holding infrastructure projects;(b) notwithstanding clause (a) of sub-regulation (5), such funds may also invest in listedsecuritized debt instruments or listed debt securities of investee companies or special |
| 17 The following investment conditions shall apply to Category II Alternative Investment Funds:-(a) Category II Alternative Investment Funds shall invest primarily in unlisted investeecompanies or in units of other Alternative Investment Funds as may be specified in theplacement memorandum;(b) Fund of Category II Alternative Investment Funds may invest in units of Category I orCategory II Alternative Investment Funds:Provided that they shall only invest in such units and shall not invest in units of other Fundof Funds.(c) Category II Alternative Investment Funds may not borrow funds directly or indirectly andshall not engage in leverage except for meeting temporary funding requirements for notmore than thirty days, not more than four occasions in a year and not more than ten percentof the 29[investable funds];(d) Notwithstanding clause (c), Category II Alternative Investment Funds may engage inhedging, subject to guidelines as specified by the Board from time to time;(e) Category II Alternative Investment Funds may enter into an agreement with merchantbanker to subscribe to the unsubscribed portion of the issue or to receive or deliversecurities in the process of market making under Chapter XB of the Securities and |
| 2009 word “corpus”(f) Category II Alternative Investment Funds shall be exempt from regulation 3 and 3A ofSecurities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992in respect of investment in companies listed on SME Exchange or SME segment of anexchange pursuant to due diligence of such companies subject to the following conditions:(i) the fund shall disclose any acquisition or dealing in securities pursuant to such due-diligence, within two working days of such acquisition or dealing, to the stockexchanges where the investee company is listed;(ii) such investment shall be locked in for a period of one year from the date of investment. |
| 18 The following investment conditions shall apply to Category III Alternative Investment Funds:-(a) Category III Alternative Investment Funds may invest in securities of listed or unlistedinvestee companies or derivatives or complex or structured products;30[(aa) Category III Alternative Investment Funds may deal in goods received in delivery againstphysical settlement of commodity derivatives;](b) 31[Fund of Category III] Alternative Investment Funds may invest in units of Category Ior Category II Alternative Investment Funds:Provided that they invest solely in such units and shall not invest in units of other Fund ofFunds.(c) Category III Alternative Investment Funds may engage in leverage or borrow subject toconsent from the investors in the fund and subject to a maximum limit, as may be specifiedby the Board:Provided that such funds shall disclose information regarding the overall level of leverageemployed , the level of leverage arising from borrowing of cash, the level of leverage arisingfrom position held in derivatives or in any complex product and the main source of leveragewords and symbol “Fund of Category II”in their fund to the investors and to the Board periodically, as may be specified by theBoard.(d) Category III Alternative Investment Funds shall be regulated through issuance of directionsregarding areas such as operational standards, conduct of business rules, prudentialrequirements, restrictions on redemption and conflict of interest as may be specified by theBoard. |
| 19 The Board may lay down framework for Alternative Investment Funds other than the Funds |
| 19A For the purposes of this Chapter, unless the context otherwise requires, the terms defined herein shall bear the meanings assigned to them below, and their cognate expressions and variations shall be construed accordingly,-(1) “angel fund” means a sub-category of Venture Capital Fund under Category I- AlternativeInvestment Fund that raises funds from angel investor s and invests in accordance with theprovisions of this Chapter.(2) "angel investor " means any person who proposes to invest in an angel fund and satisfies oneof the following conditions, namely,(a) an individual investor who has net tangible assets of at least two crore rupees excluding valueof his principal residence, and who:(i) has early stage investment experience, or(ii) has experience as a serial entrepreneur, or(iii) is a senior management professional with at least ten years of experience;mean prior experience in investing in start-up or emerging or early-stage ventures and'serial entrepreneur' shall mean a person who has promoted or co-promoted more than onestart-up venture.(b) a body corporate with a net worth of at least ten crore rupees; or(c) an Alternative Investment Fund registered under these regulations or a Venture Capital Fundregistered under the SEBI (Venture Capital Funds) Regulations, 1996.(3) "company with family connection" means:a. if the angel investor is an individual,i. any company which is promoted by such an individual or his relative; orii. any company where the individual or his relative is a director; oriii. any company where the person or his relative has control, or shares or voting rightswhich entitle them to fifteen percent or more of the shares or voting rights in the company.33[ sub-section 77 of section 2 of the Companies Act, 2013].assigned to it under sub-regulation (1) of regulation 2 of the Securities and Exchange Boardof India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.b. if the angel investor is a body corporate ,i. any company which is a subsidiary or a holding company of the investor ;orii. any company which is part of the same group or under the same management of the investor ; orto the substitution, it read as “section 6 of the Companies Act, 1956 (1 of 1956)”.management" shall have the same meaning as assigned to it under regulation 23 of theSecurities and Exchange Board of India (Issue of Capital and Disclosure Requirements)Regulations, 2009.iii. any company where the body corporate or its directors/partners have control, or sharesor voting rights which entitle them to fifteen percent or more of the shares or voting rightsin the company.assigned to it under sub-regulation (1) of regulation 2 of the Securities and Exchange Board ofIndia (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. |
| 19B (1) The provisions of this Chapter shall apply to angel funds and schemes launched by such angel funds. |
| 19B (2) All other provisions of these regulations , except clauses (a), (b), (c), (d) and (f) of regulation 10, regulation 12, regulation 14, clauses (a), (c) and (e) of sub-regulation (1) of regulation 15, clause (b) of sub-regulation (1) of regulation 16 and sub-regulation (2) of regulation 16, and the guidelines and circulars issued under these regulations , unless the context otherwise requires or repugnant to the provisions of this Chapter, shall apply to angel funds, their sponsors and managers and angel investors . |
| 19C (1) An applicant may apply for registration as an angel fund in accordance with the provisions of Chapter II of these Regulations. |
| 19C (2) An Alternative Investment Fund already registered under these regulations, which has not made any investments, may apply for conversion of its category into an angel fund under the provisions of this Chapter and the provisions of Chapter II shall apply as they apply to a freshregistration. |
| 19D (1) Angel funds shall only raise funds by way of issue of units to angel investors . |
| 19D (2) An angel fund shall have a corpus of at least 34[five] crore rupees. |
| 19D (3) Angel funds shall accept, up to a maximum period of 35[five] years, an investment of not less than twenty five lakh rupees from an angel investor . |
| 19D (4) Angel fund shall raise funds through private placement by issue of information memorandum or placement memorandum , by whatever name called. 36[Provided that the provisions of the Companies Act, 2013 shall apply to the Angel Fund , if it is formed as a company .] |
| 19E 37[(1) The angel fund may launch schemes subject to filing of a term sheet with the Board , containing material information regarding the scheme, in the format and time period as may be specified by the Board .] 38[***] 39[***] to the substitution, it read as “ten”. to the substitution, it read as “three”. to the substitution, it read as “The angel fund may launch schemes subject to filing of a scheme memorandum at least ten working days prior to launch of the scheme with the Board : Provided that payment of scheme fees shall not apply to schemes launched by angel funds.”. the omission, it read as “(2) Such scheme memorandum shall contain all material information about the investments proposed under such scheme. ” the omission, it read as “(3) The Board may communicate its comments, if any, to the applicant prior to launch of the Scheme and the applicant shall incorporate the comments in the scheme memorandum prior to launch of thescheme.”40[(2)] No scheme of the angel fund shall have more than 41[two hundred] angel investors.42[Provided that the provisions of the Companies Act, 2013 shall apply to the Angel Fund , ifit is formed as a company .] |
| 19F (1) Angel funds shall invest 43[***] in venture capital undertakings which:(a) 44[complies withthe criteria regardingthe age ofthe venture capitalundertaking/startup issued by the Department of Industrial Policy and Promotion underthe Ministry of Commerce and Industry, Government of India vide notification no. G.S.R.180(E) dated February 17, 2016 or such other policy made in this regard which may be inforce;](b) have a turnover of less than twenty five crore rupees;(c) are not promoted or sponsored by or related to an industrial group whose group turnoverexceeds three hundred crore rupees; and body corporates with the same promoter(s)/promoter group, a parent company and itssubsidiaries, a group of body corporates in which the same person/ group of personsexercisecontrol,andagroupofbodycorporatescomprisedofassociates/subsidiaries/holding companies.revenue of the industrial group.to the substitution, it read as “(4)”w.e.f. 04-01-2017.04-01-2017.investment;” by the SEBI (Alternative Investment Funds) (Amendment) Regulations, 2016, w.e.f. 04-01-2017.(d) are not companies with family connection with any of the angel investors who areinvesting in the company . |
| 19F (2) Investment by an angel fund in any venture capital undertaking shall not be less than 45[twenty five] lakh rupees and shall not exceed 46[ten crores] rupees. |
| 19F (3) Investment by an angel fund in the venture capital undertaking shall be locked-in for a period of 47[one year]. |
| 19F (4) Angel funds shall not invest in associates. |
| 19F (5) Angel funds shall not invest more than twenty-five per cent of the total investments under all its schemes in one venture capital undertaking: Provided that the compliance to this sub-regulation shall be ensured by the Angel Fund at the end of its tenure. 48[(6) An angel fund may also invest in the securities of companies incorporated outside India |
| 19G (1) The sponsor shall ensure that the angel investors satisfy the conditions specified in sub- regulation (2) of regulation 19A. |
| 19G (2) The manager or sponsor shall have a continuing interest in the angel fund of not less than two and half percent of the corpus or fifty lakh rupees, whichever is lesser, and such interest shall not be through the waiver of management fees.w.e.f. 04-01-2017.to its substitution, it read as “five crores”.2016, w.e.f. 04-01-2017. |
| 19G (3) The manager of the angel fund shall obtain an undertaking from every angel investor proposing to make investment in a venture capital undertaking, confirming his approval for such an |
| 20 (1) All Alternative Investment Funds shall review policies and procedures, and their implementation, on a regular basis, or as a result of business developments, to ensure their continued appropriateness. |
| 20 (2) The Sponsor or Manager of Alternative Investment Fund shall appoint a custodian registered with the Board for safekeeping of securities if the corpus of the Alternative Investment Fund is more than five hundred crore rupees: Provided that the Sponsor or Manager of a Category III Alternative Investment Fund shall appoint such custodian irrespective of the size of corpus of the Alternative Investment Fund. 49[Provided further that the custodian appointed by Category III Alternative Investment Fund shall keep custody of securities and goods received in delivery against physical settlement of commodity derivatives.] |
| 20 (3) All Alternative Investment Funds shall inform the Board in case of any change in the Sponsor, Manager or designated partners or any other material change from the information provided by the Alternative Investment Fund at the time of application for registration . |
| 20 (4) In case of change in control of the Alternative Investment Fund , Sponsor or Manager, prior approval from the Board shall be taken by the Alternative Investment Fund . |
| 20 (5) The books of accounts of the Alternative Investment Fund shall be audited annually by a qualified auditor. 50[(6) The Manager shall be responsible for investment decisions of the Alternative Investment Fund : Provided that the Manager may constitute an Investment Committee (by whatever name it may be called), to approve investment decisions of the Alternative Investment Fund, subject to the following:(i) The members of Investment Committee shall be equally responsible as theManager for investment decisions of the Alternative Investment Fund .(ii) The Manager and members of the Investment Committee shall jointly andseverally ensure that the investments of the Alternative Investment Fund arein compliance with the provisions of these regulations, the terms of theplacement memorandum, agreement made with the investor , any other funddocuments and any other applicable law.(iii) External members whose names are not disclosed in the placementmemorandum or agreement made with the investor or any other funddocuments at the time of on-boarding investor s, shall be appointed to theInvestment Committee only with the consent of at least seventy five percentof the investor s by value of their investment in the Alternative InvestmentFund or scheme.(iv) Any other conditions as specified by the Board from time to time51[:]]52[Provided further that clauses (i) and (ii) shall not apply to an Alternative InvestmentFund in which each investor other than the Manager, Sponsor, employees or directors ofthe Alternative Investment Fund or employees or directors of the Manager, has committedto invest not less than seventy crore rupees (or an equivalent amount in currency other thanIndian rupee) and has furnished a waiver to the Alternative Investment Fund in respect ofcompliance with the said clauses, in the manner specified by the Board .]52 Ibid. |
| 21 (1) The Sponsor and Manager of the Alternative Investment Fund shall act in a fiduciary capacity towards its investors and shall disclose to the investors , all conflicts of interests as and when they arise or seem likely to arise. |
| 21 (2) Manager shall establish and implement written policies and procedures to identify, monitor and appropriately mitigate conflicts of interest throughout the scope of business. |
| 21 (3) Managers and Sponsors of Alternative Investment Fund shall abide by high level principles on avoidance of conflicts of interest with associated persons, as may be specified by the Board from time to time. |
| 22 All Alternative Investment Fund s shall ensure transparency and disclosure of information to investors on the following:(a) financial, risk management, operational, portfolio, and transactional information regardingfund investments shall be disclosed periodically to the investors;(b) any fees ascribed to the Manager or Sponsor; and any fees charged to the AlternativeInvestment Fund or any investee company by an associate of the Manager or Sponsor shallbe disclosed periodically to the investors;(c)any inquiries/ legal actions by legal or regulatory bodies in any jurisdiction, as and whenoccurred;(d) any material liability arising during the Alternative Investment Fund’s tenure shall bedisclosed, as and when occurred;(e) any breach of a provision of the placement memorandum or agreement made with theinvestor or any other fund documents, if any, as and when occurred;(f) change in control of the Sponsor or Manager or Investee Company.(g) Alternative Investment Fund shall provide at least on an annual basis, within 180 days fromthe year end, reports to investors including the following information, as may be applicableto the Alternative Investment Fund :-A. financial information of investee companies.B. material risks and how they are managed which may include:(i) concentration risk at fund level;(ii) foreign exchange risk at fund level;(iii)leverage risk at fund and investee company levels;(iv) realization risk (i.e. change in exit environment) at fund and investee companylevels;(v) strategy risk (i.e. change in or divergence from business strategy) at investeecompany level;(vi) reputation risk at investee company level;(vii) extra-financial risks, including environmental, social and corporate governancerisks, at fund and investee company level.(h) Category III Alternative Investment Fund shall provide quarterly reports to investors inrespect of clause (g) within 60 days of end of the quarter;(i) any significant change in the key investment team shall be intimated to all investors;(j) alternative Investment Funds shall provide, when required by the Board , information forsystemic risk purposes (including the identification, analysis and mitigation of systemicrisks). |
| 23 (1) The Alternative Investment Fund shall provide to its investors, a description of its valuation procedure and of the methodology for valuing assets. |
| 23 (2) Category I and Category II Alternative Investment Fund s shall undertake valuation of their investments , atleast once in every six months, by an independent valuer appointed by the Alternative Investment Fund : Provided that such period may be enhanced to one year on approval of atleast seventy-five percent of the investors by value of their investment in the Alternative Investment Fund . |
| 23 (3) Category III Alternative Investment Funds shall ensure that calculation of the net asset value (NAV) is independent from the fund management function of the Alternative Investment Fund and such NAV shall be disclosed to the investors at intervals not longer than a quarter for close ended Funds and at intervals not longer than a month for open ended funds. |
| 24 The Manager shall be obliged to:(a) address all investor complaints;(b) provide to the Board any information sought by Board;(c) maintain all records as may be specified by the Board;(d) take all steps to address conflict of interest as specified in these regulations;(e) ensure transparency and disclosure as specified in the regulations. |
| 25 An Alternative Investment Fund , by itself or through the Manager or Sponsor, shall lay down procedure for resolution of disputes between the investors , Alternative Investment Fund, Manager or Sponsor through arbitration or any such mechanism as mutually decided between the investors and the Alternative Investment Fund . |
| 26 (1) The Board may at any time call for any information from an Alternative Investment Fund or its Manager or Sponsor or trustee or investor with respect to any matter relating to its activity as an Alternative Investment Fund or for the assessment of systemic risk or prevention of fraud. |
| 26 (2) Where any information is called for under sub-regulation (1) it shall be furnished within the time specified by the Board. |
| 27 (1) The Manager or Sponsor shall be required to maintain following records describing:(a) the assets under the scheme/fund;(b) valuation policies and practices;(c) investment strategies;(d) particulars of investors and their contribution;(e) rationale for investments made. |
| 27 (2) The records under sub-regulation (1) shall be maintained for a period of five years after the |
| 28 The Board may at any time call upon the Alternative Investment Fund to file such reports, as the Board may desire, with respect to the activities carried on by the Alternative Investment Fund . |
| 29 (1) An Alternative Investment Fund set up as a trust shall be wound up:(a) when the tenure of the Alternative Investment Fund or all schemes launched by theAlternative Investment Fund, as mentioned in the placement memorandum is over;or(b) if it is the opinion of the trustees or the trustee company, as the case may be, that theAlternative Investment Fund be wound up in the interests of investors in the units; or(c) if seventy five percent of the investors by value of their investment in the AlternativeInvestment Fund pass a resolution at a meeting of unitholders that the AlternativeInvestment Fund be wound up; or(d) if the Board so directs in the interests of investors . |
| 29 (2) An Alternative Investment Fund set up as a limited liability partnership shall be wound up in accordance with the provisions of The Limited Liability Partnership Act, 2008:(a) when the tenure of the Alternative Investment Fund or all schemes launched by theAlternative Investment Fund, as mentioned in the placement memorandum is over;or(b) if seventy five percent of the investors by value of their investment in the AlternativeInvestment Fund pass a resolution at a meeting of unitholders that the AlternativeInvestment Fund be wound up; or(c) if the Board so directs in the interests of investors . |
| 29 (3) An Alternative Investment Fund set up as a company shall be wound up in accordance with the provisions of the 53[Companies Act , 2013]. |
| 29 (4) An Alternative Investment Fund set up as a body corporate shall be wound up in accordance with the provisions of the statute under which it is constituted. |
| 29 (5) The trustees or trustee company or the Board of Directors or designated partners of the Alternative Investment Fund , as the case maybe, shall intimate the Board and investors of the circumstances leading to the winding up of the Alternative Investment Fund . |
| 29 (6) On and from the date of intimation under sub-regulation (5) of regulation 29, no further investments shall be made on behalf of the Alternative Investment Fund so wound up. |
| 29 (7) Within one year from the date of intimation under sub-regulation (5) of regulation 29, the assets shall be liquidated, and the proceeds accruing to investors in the Alternative Investment Fund shall be distributed to them after satisfying all liabilities. |
| 29 (8) Notwithstanding anything contained in sub-regulation (7) and subject to the conditions, if any, contained in the placement memorandum or contribution agreement or subscription agreement , as the case may be, in specie distribution of assets of the Alternative Investment Fund, shall be made by the Alternative Investment Fund at any time, including on winding up of the Alternative Investment Fund , as per the preference of investors, after obtaining approval of at least seventy five percent of the investors by value of their investment in the Alternative Investment Fund. |
| 30 The Board may suo motu or upon receipt of information or complaint appoint one or more persons as Inspecting Authority to undertake inspection of the books of account, records and documents relating to an Alternative Investment Fund for any of the following reasons, namely, —(a) to ensure that the books of account, records and documents are being maintained by theAlternative Investment Fund in the manner specified in these regulations;(b) to inspect complaints received from investors , clients or any other person, on any matterhaving a bearing on the activities of the Alternative Investment Fund;(c) to ascertain whether the provisions of the Act and these regulations are being compliedwith by the Alternative Investment Fund;(d) to inspect suo motu the affairs of an Alternative Investment Fund, in the interest of thesecurities market or in the interest of investors . |
| 31 (1) Before ordering an inspection under regulation 30, the Board shall give not less than ten days notice to the Alternative Investment Fund . |
| 31 (2) Notwithstanding anything contained in sub-regulation (1) where the Board is satisfied that in the interest of the investors no such notice should be given , it may by an order in writing direct that the inspection of the affairs of the Alternative Investment Fund be taken up without such notice. |
| 31 (3) During the course of an inspection, the Alternative Investment Fund against whom the inspection is being carried out shall be bound to discharge its obligations as provided in regulation 32. |
| 32 (1) It shall be the duty of every officer of the Alternative Investment Fund in respect of whom an inspection has been ordered under regulation 30 and any other associated person who is in possession of relevant information pertaining to conduct and affairs of such Alternative Investment Fund including Manager, if any, to produce to the Inspecting Authority such books, accounts and other documents in his custody or control and furnish him with such statements and information as the said Authority may require for the purposes of the inspection . |
| 32 (2) It shall be the duty of every officer of the Alternative Investment Fund and any other associated person who is in possession of relevant information pertaining to conduct and affairs of the Alternative Investment Fund including the manager to give to the Inspecting Authority all such assistance and shall extend all such co-operation as may be required in connection with the inspection and shall furnish such information as sought by the Inspecting Authority in connection with the inspection . |
| 32 (3) The Inspecting Authority shall, for the purposes of inspection, have power to examine on oath and record the statement of any employees, directors or person responsible for or connected with the activities of Alternative Investment Fund or any other associated person having relevant information pertaining to such Alternative Investment Fund . |
| 32 (4) The Inspecting Authority shall, for the purposes of inspection, have power to obtain authenticated copies of documents, books, accounts of Alternative Investment Fund , from |
| 33 The Inspecting Authority shall, as soon as possible, on completion of the inspection submit an inspection report to the Board : Provided that if directed to do so by the Board , he may submit an interim report. |
| 34 The Board may after consideration of the inspection report and after giving reasonable opportunity of hearing to the Alternative Investment Fund or its trustees, directors or manager issue such direction as it deems fit in the interest of securities market or the investors including directions in the nature of :—(a) requiring an Alternative Investment Fund not to launch new schemes or raise money from investors for a particular period;(b) prohibiting the person concerned from disposing of any of the properties of the fund orscheme acquired in violation of these regulations;(c) requiring the person connected to dispose of the assets of the fund or scheme in a manneras may be specified in the directions;(d) requiring the person concerned to refund any money or the assets to the concerned investors along with the requisite interest or otherwise, collected under the scheme;(e) prohibiting the person concerned from operating in the capital market or from accessing |
| 35 (1) An Alternative Investment Fund which—(a) contravenes any of the provisions of the Act or these regulations;(b) fails to furnish any information relating to its activity as an Alternative InvestmentFund as required by the Board;(c) furnishes to the Board information which is false or misleading in any materialparticular;(d) does not submit periodic returns or reports as required by the Board;(e) does not co-operate in any enquiry, inspection or investigation conducted by theBoard;(f) fails to resolve the complaints of investors or fails to give a satisfactory reply to theBoard in this behalf,shall be dealt with in the manner provided under the Securities and Exchange Board ofIndia (Intermediaries) Regulations, 2008. |
| 35 (2) Sub-regulation (1) shall not prejudice the powers of the Board to issue directions or |
| 35A (1) The Board may, exempt any person or class of persons from the operation of all or any of the provisions of these regulations for a period as may be specified but not exceeding twelve months, for furthering innovation in technological aspects relating to testing new products, processes, services, business models, etc. in live environment of regulatory sandbox in the securities markets . |
| 35A (2) Any exemption granted by the Board under sub-regulation (1) shall be subject to the applicant satisfying such conditions as may be specified by the Board including conditions to |
| 36 In order to remove any difficulties in the application or interpretation of these regulations , the Board may issue clarifications and guidelines in the form of circulars or issue separate circular or guidelines or framework for each category of Alternative Investment Funds. Delegation of powers. |
| 37 The powers exercisable by the Board under these regulations shall also be exercisable by any officer of the Board to whom such powers are delegated by the Board by means of an order made under section 19 of the Securities and Exchange Board of India Act, 1992. |
| 38 The regulations specified in the Third Schedule to these regulations shall be amended in the manner and to the extent stated therein. |
| 39 (1) The Securities and Exchange Board of India (Venture Capital Funds) Regulations, 1996 hereby shall stand repealed. |
| 39 (2) Notwithstanding such repeal:(a) Anything done or any action taken or purported to have been done or taken, includingsuspension or cancellation of certificate of registration, any inquiry or investigationcommenced or show cause notice issued under the repealed regulations , shall bedeemed to have been done or taken under the corresponding provisions of these regulations ;(b) All venture capital funds or schemes launched by such venture capital funds prior todate of notification of these regulations shall continue to be governed by provisionsof Securities and Exchange Board of India (Venture Capital Funds) Regulations,1996 till the fund or Scheme is wound up:Provided that such funds shall not launch any new Scheme after notification of these regulations ;(c) Any application made to the Board under the Securities and Exchange Board of India(Venture Capital Funds) Regulations, 1996 and pending before it shall be deemed tohave been made under the corresponding provisions of Securities and ExchangeBoard of India (Alternative Investment Funds) Regulations, 2012. |
| 39 (3) After the repeal of Securities and Exchange Board of India (Venture Capital Funds) Regulations, 1996, any reference thereto in any other regulations made, guidelines or |