New Delhi, July 15 -- Venture capital funds that have migrated to the Alternative Investment Funds (AIF) regime can now avert regulatory penalties for failing to wind up their investment vehicles despite the expiry of their liquidation periods or for holding unliquidated investments.
The Securities and Exchange Board of India on Tuesday introduced a scheme that allows legacy VC funds, which were set up before the AIF regulations came into force in 2012 and which have migrated to the new regime, to settle regulatory actions.
The capital markets regulator said that funds that have at least one scheme whose tenure has expired but has not been wound up, and has completed the migration, can apply for the VCF Settlement Scheme, 2025. The scheme will be valid from July 21, 2025, through January 19, 2026.
Under this scheme, the base amount for settlement for delay of up to one year in winding up a VC fund will be Rs 1 lakh. For every subsequent year of delay or part therefore, the fund manager will have to pay an additional Rs 50,000.
For holding unliquidated investments beyond the tenure of the fund, settlement amounts vary between Rs 1 lakh and Rs 6 lakh. The settlement amounts vary depending on the cost of holding these investments, which can range from less than Rs 25 crore to more than Rs 200 crore, as on date of application for migration.
Background
VC funds in India were once regulated by the SEBI (Venture Capital Funds) Regulations. These regulations were repealed in May 2012 when the SEBI (Alternative Investment Funds) Regulations were notified. However, funds registered under the VCF Regulations continued to be regulated by these norms until their investment vehicles were wound up.
SEBI had asked these funds to migrate to the AIF regulations after seeing that these funds continued to hold their investments beyond their tenure and faced difficulty in liquidating their investments due to poor market conditions or other compliance hassles. The regulator gave them time till July 19, 2025 to finish the migration, or wind up by July 19, 2026. The latest scheme is for those funds which have opted to migrate and have completed the process.
Eligible funds who want to apply for this scheme will need to file an application with a non-refundable fee of Rs 25,000 plus Goods and Services Tax of 18%. The application format will be made available on the regulator's website, SEBI said.
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Published by HT Digital Content Services with permission from VC Circle.