Angel funds need to disclose about investment, 'material changes': Sebi

Angel funds will have to disclose details related to investment as well as venture capital undertakings and "material changes", within 10 days of launching a scheme, markets regulator Sebi said.

Releasing the format of the term sheet, the regulator said that angel fund can launch new schemes, subject to the filing of the term sheet, it needs to contain material information and have to be filed with Sebi within 10 days of launching the scheme.

The term sheet has three categories -- information related to investment and investee company; compliance with Sebi's AIF regulation; and "material change", the regulator said in a circular.

Angel Funds, a sub-category Alternative Investment Funds (AIFs), encourage entrepreneurship by financing small startups at a stage when they find it difficult to obtain capital from traditional sources of finance such as banks and financial institutions.

The markets regulator, last month, had replaced the requirement of filing of scheme memorandum to Sebi by angel funds with the requirement of filing term sheet containing material information.

Now, the Securities and Exchange Board of India (Sebi) has released the format of the term sheet.

With regard to investment and investee firm, information pertaining to name of the angel fund as well as scheme, name of the investee company, services offered by it, its business details, present investment size, investment highlight, total capital commitment by investors, capital drawn by the fund, price per share, details of lock in for share and exit strategy for angel fund among others need to be divulged.

Further, the term sheet will also have information pertaining to list of investors in the scheme and compliance with the AIF rules, whether the fund has corpus of Rs 5 crore and whether the funds have been raised through private placement among others.

Besides, angel fund will have to submit details of material changes, rationale for such change and date of approval from Sebi in this regard.

In order to provide impetus to early-stage startups, Sebi last month, increased the maximum investment limit by angel funds in venture capital undertakings to Rs 10 crore from the current Rs 5 crore.

However, the minimum investment by an angel investor will continue to be Rs 25 lakh.

Further, the regulator had halved the minimum corpus size required for an angel fund to register with it to Rs 5 crore.

Besides, the regulator has raised the maximum period of accepting funds from an angel investor to five years, from three years. The move will provide angel funds more time to identify opportunities and invest in venture capital firms.

Earlier, Sebi had formed a working group comprising various angel networks, consultants and start-ups in a bid to provide ease of doing business for angel funds.