Sebi Outlines Venture Capital Fund Migration to AIF Rules

New Delhi, Aug 19 (PTI) Markets regulator Sebi on Monday outlined the process and conditions for Venture Capital Funds (VCFs) for migrating to the Alternative Investment Funds (AIF) rules.

The regulator, in July, permitted VCFs registered before the introduction of AIF regulations to transition to the current regulations by becoming migrated venture capital funds.

In its circular, the Securities and Exchange Board of India (Sebi) said that VCFs can now choose to migrate to AIF Regulations to handle unliquidated investments after their scheme tenure ends.

This option is available until July 19, 2025.

A 'Migrated VCF' is a VCF that transitions to become a sub-category of VCF under Category I - Alternative Investment Fund as per the AIF norms.

On application requirements, Sebi said that VCFs wishing to migrate must submit their original registration certificate and specific information as outlined by the regulator.

With regards to the conditions for VCFs with active schemes, Sebi said that if the liquidation period hasn't expired, they can migrate, with the scheme's tenure continuing as originally disclosed or determined with investor approval.

If the liquidation period has expired, they must not have any unresolved investor complaints and will get an extra year (until July 19, 2025) to liquidate.

On post-migration considerations, Sebi said that after migration, existing investors, investments, and units will be transferred under the AIF Regulations without change.

With regards to VCFs not opting for migration, Sebi said that VCFs with active schemes will face stricter reporting requirements and VCFs with expired schemes may face regulatory action.

"Scheme(s) of VCFs, whose liquidation period (in terms of Regulation 24(2) of VCF Regulations) has not expired, shall be subject to enhanced regulatory reporting... in line with the regulatory reporting applicable to AIFs under AIF Regulations," said the Sebi circular.

It further said that "VCFs having at least one scheme whose liquidation period (in terms of Regulation 24(2) of VCF Regulations) has expired shall be subject to appropriate regulatory action for continuing beyond the expiry of their original liquidation period."

VCFs that have wound up all schemes or haven't made any new investments would be required to surrender their registration by March 31, 2025, Sebi said.