24 November 2016, India :
To boost startup funding in the country, the Securities and Exchange Board of India (Sebi) on Wednesday eased norms for angel funds, allowing them to invest in up to five year old startups.
In order to further develop the alternative investment industry and the startup ecosystem in India, SEBI, in March 2015, constituted a Committee of experts drawn from the across market participants called the “Alternative Investment Policy Advisory Committee” (“AIPAC”) under the chairmanship of N.R. Narayana Murthy.
“No employee including key managerial personnel, director or promoter of a listed entity shall enter into any agreement for himself or on behalf of any other person, with any shareholder or any other third party with regard to compensation or profit sharing unless prior approval has been obtained from the board as well as public shareholders,” said Sebi in a release after the meeting of its board.
AIPAC had submitted its report to SEBI with various recommendations including certain recommendations relating to Angel Funds. Considering the recommendations in the report and public comments thereon, the SEBI Board has approved following amendments to SEBI (Alternative Investment Funds) Regulations, 2012 with respect to ‘Angel Funds’:
i) The upper limit for number of angel investors in a scheme is increased from forty-nine to two hundred.
ii) The definition of start-up for Angel Funds investments be similar to definition of DIPP as given in their start-up policy. Accordingly, Angel Funds will be allowed to invest in start-ups incorporated within five years, which was earlier 3 years.
iii) The requirements of minimum investment amount by an Angel Fund in any venture capital undertaking is reduced from fifty lakhs to twenty-five lakhs.
iv) The lock-in requirements of investment made by Angel Funds in the venture capital undertaking is reduced from three years to one year.
v) Angel Funds are allowed to invest in overseas venture capital undertakings upto 25% of their investible corpus in line with other AIFs.
Apart from this, Sebi also barred private equity firms and their investee companies from entering into any compensation agreements with the promoters, directors or key officials of listed investee firms without prior approval of board and public shareholders.
