1. Giving effect to the announcement in Budget for FY 2013-14 by Hon’ble Finance Minister on angel investor pools, amendments to SEBI (Alternative Investment Funds) Regulations, 2012 (“AIF Regulations”) have been notified thereby providing a framework for registration and regulation of angel pools under a sub-category ‘Angel Funds’ under Category I- Venture Capital Funds.
2. Salient features of such Angel Funds are as under:
a. Angel Funds have been included in the definition of ‘Venture Capital Funds’ and a separate Chapter has been inserted specific to such funds. Angel funds shall raise funds only from angel investors.
b. In view of the high risk investments of such funds, certain conditions have been imposed on investors. For instance, individual angel investors shall be required to have early stage investment experience/ experience as a serial entrepreneur/ be a senior management professional with 10 years experience. They shall also be required to have net tangible assets of atleast Rs. 2 crore. Corporate angel investors shall be required to have Rs. 10 crore net worth or be a registered AIF/VCF.
c. Angel Funds shall have a corpus of atleast Rs.10 crore (as against Rs. 20 crore for other AIFs) and minimum investment by an investor shall be Rs. 25 lakhs (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 lakhs, whichever is lesser.
d. For ensuring investments are genuine angel investments, angel funds shall invest only in venture capital undertakings which are not more than 3 years old, have a turnover not exceeding Rs 25 crore, are not promoted, sponsored or related to an Industrial Group whose group turnover is in excess of Rs. 300 crore, and have no family connection with the investors proposing to invest in the company.
e. Further, investment in an investee company by an angel fund shall be not less than Rs. 50 lakhs and more than Rs. 5 crore and shall be required to be held for a period of at least 3 years.
3. Further, a minimum amount of Rs. 25 lakhs can be collected as grants by Social Venture Funds. However, no profits or gains shall accrue to the provider of such grants.
September 16, 2013