Revised regulatory framework for Angel Funds under AIF Regulations

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....is context, the specific conditions and modalities with respect to various provisions pertaining to Angel Funds are being prescribed by way of this circular. A. Fund raising by Angel Funds - 2. In terms of Regulation 19D(1) of AIF Regulations, Angel Funds shall raise funds only from Accredited Investors by way of issue of units, in the manner as may be specified by SEBI from time to time. In this regard, the following is specified - 2.1. Angel Funds which are granted registration by SEBI post the issuance of this circular, shall on-board and offer investment opportunities to Accredited Investors only. 2.2. Angel Funds registered with SEBI on or before the date of issuance of this circular shall comply with the following - (a) Such Ang....

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....ot declared within the timeline specified above, the Angel Fund shall refile the PPM with SEBI as per applicable provisions of AIF Regulations by paying requisite fee to SEBI. B. Investments by Angel Funds - 4. In terms of Regulation 19E of AIF Regulations, an Angel Fund shall not launch any schemes for soliciting funds from angel investors or making any investments. Accordingly, the following is specified - 4.1. Investments in investee companies shall be made directly by Angel Funds, without the requirement of launching a scheme for this purpose. Consequently, the provisions of AIF Regulations which are applicable to a scheme of an AIF, shall be applicable to the Angel Fund at fund level, unless stated otherwise. 4.2. The requirement ....

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....shall be subject to lock-in period as may be specified by SEBI. In this regard, the following is specified - 6.1. Investment by an Angel Fund in an investee company shall be locked-in for a period of one year. 6.2. The aforesaid lock-in requirement shall be for a period of six months if the exit from the investment by Angel Fund is by way of sale to a third party, that is, excluding buy-back by the investee company or purchase by its promoters or their associates. Any such sale shall be subject to terms of Articles of Association of the investee company. 7. In terms of Regulation 19F(7) of AIF Regulations, Angel Funds may invest in the securities of companies incorporated outside India subject to such conditions or guidelines that may be....

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..... 9. In terms of Regulation 19G(6) of AIF Regulations, the investors of an Angel Fund shall have rights in an investment of the Angel Fund and in the distribution of proceeds of the investment, pro-rata to their contribution to such investment, except in cases as may be specified by the Board from time to time. In this regard, it is specified that the requirement of maintaining pro-rata rights of investors in distribution of proceeds of investments of a scheme, shall not be applicable to the extent returns or profit on the investments is shared by an investor with the manager or sponsor of the AIF or the employees/directors/partners of the manager of AIF (by whatever name it is called, such as carried interest/additional return), in terms....

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....lated based on corpus/ investable funds, shall henceforth be calculated based on the total investments made by the Angel Fund (at cost). 15. In this regard, with respect to SEBI circular dated October 08, 2024 on 'Specific due- diligence of investors and investments of AIFs', it is further clarified that the thresholds specified in para 3.2.1, 4.2.1, 5.1.1 and 8.2.1 of the said circular shall be calculated at each investment level, based on contribution of investors to a particular investment (instead of calculating based on corpus at fund level). 16. The trustee/sponsor of AIF, as the case may be, shall ensure that the 'Compliance Test Report' prepared by the manager in terms of Chapter 15 of AIF Master Circular, includes compliance with....