Securities market regulator SEBI has notified amendments to the Alternative Investment Funds (AIF) regulations, including the framework for registration and regulation of angel funds. This comes
after SEBI said in June that it will bring angel funds and angel pools under the ambit of AIF regulations.
While most of the provisions remain same in the final notification, SEBI has relaxed some norms for social venture funds, which come under category I of AIF norms. Under the amended norms a minimum amount of Rs 25 lakh can be collected as grants by social venture funds but no profits or gains shall accrue to the provider of such grants.
This minimum subscription for social venture funds is same as other angel funds but much smaller than other VC funds.
It has also created a sub-category of ‘Angel Funds’ under category I of AIF regulations. As proposed earlier, the angel funds shall have a corpus of at least Rs 10 crore as compared to Rs 20 crore for other AIFs. Also the minimum investment by an investor or limited partner (LP) will be Rs 25 lakh as against Rs 1 crore for other AIFs.
SEBI has also said the investment by a sponsor or manager should not be less than 2.5 per cent of the corpus or Rs 50 lakh, whichever is lesser.
As previously announced, SEBI has added that individual angel investors shall be required to have early stage investment experience/experience as serial entrepreneurs/be senior management professionals with 10 years of experience. They shall also be required to have net tangible assets of at least Rs 2 crore while the corporate angel investors shall be required to have Rs 10 crore net worth or be a registered AIF/VCF.
Also to ensure genuine angel investments, angel funds will be allowed to invest only in startups which are not more than three years old and have a turnover of less than Rs 25 crore. Also funds should not be promoted, sponsored or related to an business group with turnover in excess of Rs 300 crore, and have no family connection with the investors proposing to invest in the company.
Also the investment by angel funds in a startup should not be less than Rs 50 lakh and can be at most Rs 5 crore, with holding period of at least three years.