The proposed regulatory changes to Angel funds in India have been officially announced by market regulator Sebi. In a statement on Tuesday, the Securities and Exchange Board of India released the framework for registration and regulation of angel pools under a sub category ‘Angel Funds’ under Category I- Venture Capital Funds.
A gist of SEBI Guidelines for Angel Funds
- ‘Angel Funds’ to be included in the definition of “Venture Capital Funds” under the SEBI (Alternative Investment Funds) Regulations, 2012.
- Individual angel investors need to have early stage investment experience, or be a serial entrepreneur or a senior management professional with 10 years experience. They will have to have tangible assets of at least Rs 2 cr. Corporate angel investors will have to have Rs 10 cr net worth or be a registered alternative investment fund.
- Angel Funds will have a corpus of at least Rs 10 crore as against Rs 20 crore for other AIFs; and minimum investment by an investor shall be Rs 25 lakh (can be over a period of 3 years) as against Rs 1 cr for other AIFs. Further, the continuing interest by sponsor/manager in the Angel Fund shall be not less than 2.5% of the corpus or Rs. 50 lakh, whichever is lesser.
- For ensuring investments are genuine angel investments, angel funds shall invest only in investee companies which:
- are incorporated in India and are not more than 3 years old; and
- have a turnover not exceeding Rs.25 crore; and
- are unlisted, and
- are not promoted, sponsored or related to an Industrial Group whose group turnover is in excess of Rs 300 crore, and
- has no family connection with the investors proposing to invest in the company.
Further, investment in an investee company by an angel fund shall be not less than Rs.50 lakh and not more than Rs.5 crore and shall be required to be held for a period of at least 3 years.
Full Sebi release here.