Market regulator SEBI has made certain amendments to the AIF regulations around ‘Angel Funds’ so as to provide a fillip to funding of early stage start-ups in the country.

‘Angel Funds’— basically a sub-category of Alternative Investment Funds — are now being allowed to invest up to ₹10 crore in a venture capital undertaking (VCU). Hitherto, the maximum investment limit was pegged at ₹5 crore.

However, there is no change to the minimum investment of ₹25 lakh by an ‘Angel Fund’ in a VCU.

What are Angel Funds?

Angel funds encourage entrepreneurship by funding small start-ups at a stage when they find it difficult to obtain capital from traditional sources of finance such as banks and financial institutions.

SEBI has also amended the Alternative Investment Fund (AIF) Regulations to halve the minimum corpus size required for an angel fund to register with it to ₹5 crore.

Giving more time

Also, SEBI has increased the maximum period of accepting funds from an angel investor to five years as against three years earlier. It is expected that the move will provide angel funds more time to identify opportunities and invest in VCUs.

Market regulator has also dispensed with the requirement of filing of scheme memorandum by angel funds. SEBI has now stipulated filing term sheet containing material information, in a format and time period to be specified by the regulator.

Companies Act

SEBI has also now said that Companies Act 2013 provisions will apply to the Angel fund, if it is formed as a company.

It may be recalled that the SEBI Board had in end March approved these amendments to the AIF Regulations.

SEBI had formed a working group comprising various angel networks, consultants and start-ups, to look at simplifying certain provisions of AIFs to provide ease of doing business for angel funds.

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