Sebi brings angel funds under AIF umbrella

The Securities and Exchange Board of India (Sebi) has decided to bring angel funds under the definition of Venture Capital Funds as per the Alternative Investment Funds (AIF) Regulations.

Angel funds are funds which look to invest in companies in the early growth stages of the entity.

The board has decided that angel funds should have a corpus of at least Rs 10 crore (as against Rs 20 crore for other AIFs) and minimum investment by an investor into such a fund shall be Rs 25 lakh (may be accepted over a period of maximum 3 years) as against Rs 1 crore for other AIFs.

“Further, the continuing interest by sponsor/manager in the angel fund shall be not less than 2.5% of the corpus or Rs. 50 lakh, whichever is lesser,” said the Sebi press release on the board meeting.

Individual investors would need to have entrepreneurial experience or be a senior management professional with at least a decade of experience. They will require net tangible assets of Rs 2 crore.

Meanwhile, corporate angel investors shall be required to have Rs 10 crore net worth.

Angel investors will only be allowed to invest in unlisted companies which are incorporated in India and are not more than 3 years old, have a turnover of Rs 25 crore or less. Investments will be barred in entities which are promoted, sponsored or related to an Industrial Group whose group turnover is in excess of Rs 300 crore or has a family connection with the investor.

The investment should be a minimum of Rs 50 lakhs and a maximum of Rs 5 crore. It would have a holding period of at least three years.