In a recent notification, the Securities and Exchange Board of India (SEBI) has announced that it has made changes to the Alternative Investment Funds (AIF) norms with respect to angel funds. In order to provide a push to early-stage start-up companies in India, the regulator has decided to increase the investment limit of angel funds in venture capital companies to Rs.10 crore from the present Rs.5 crore.
The minimum investment that an angel investor can make towards a venture capital, however, will remain Rs.25 lakh. In addition, the Securities and Exchange Board of India has also reduced the minimum corpus size that is required for a particular angel fund to register with it to a sum of Rs.5 crore. The maximum period up to which angel funds can be accepted from angel investors has also been increased to 5 years, from the current 3 years, by the regulator. This will provide angel investors sufficient time to identify the right opportunities and invest in the appropriate venture capital companies.
Further, the requirement of filing of scheme memorandum by angel funds with the SEBI will be replaced by them having to file the term sheet containing material information as mentioned by the regulator within 10 days from the launch of the scheme.
This move comes after SEBI approved a proposal for the same earlier this year. Angel funds, which are a subcategory of Alternate Investment Funds, encourage the growth of small startups by providing them capital when they find it difficult to get funds from traditional financial institutions and banks. The Securities and Exchange Board of India has also stated that the provisions of the Companies Act will apply to an angel fund if the entity is formed as a company.