Angel funds will now be classified for registration and regulation under Category-I Venture Capital Funds (VCF) said capital market regulator SEBI amending its Alternative Investment Funds (AIF) regulations.

Angel funds invest in start-ups even before venture capital funds do.

Individual angel investors are required to have a decade of experience as a senior management professional or a serial entrepreneur and a networth of Rs 2 crore. Corporates should have Rs 10 crore networth or be a registered AIF/VCF.

They are required to have a corpus of Rs 10 crore as against Rs 20 crore for VCF and a minimum investment of Rs 25 lakh as against Rs 1 crore for an AIF. The angel fund sponsor is expected to maintain a continuing corpus which is the lower of 2.5 per cent or Rs 50 lakh.

SEBI has also mandated that angel investments can be made only in unlisted companies not more than three years old with a maximum turnover of Rs 25 crore.

These should not be promoted by an industrial house whose turnover exceeds Rs 300 crore and should not be family to the prospective investors.

Avinash Gupta, Leader Financial Advisory and Senior Director, Deloitte India, said: “This investment is for the informed HNI investor who is prepared to ride out the illiquidity in the investment and also the risk of losing the investment.”

Minimum investment in any company is Rs 50 lakh and maximum Rs 5 crore with a minimum investment horizon of three years, said SEBI.

(This article was published on June 25, 2013)
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