REGISTRATION OF VENTURE CAPITAL FUNDS
Eligibility Criteria
If the application is made by a Company, -
It is prohibited by its memorandum and articles of association from making an invitation to the public to subscribe to its securities;
Its director or principal officer or employee is not involved in any litigation connected with the securities market which may have an adverse bearing on the business of the applicant;
If the application is made by a Trust, -
The instrument of trust should be in the form of a deed and must be duly registered under the provisions of the Indian Registration Act, 1908
The main objective of the trust is to carry on the activity of a venture capital fund;
The directors of its trustee company, if any, or any trustee is not involved in any litigation connected with the securities market which may have an adverse bearing on the business of the applicant;
If the application is made by a Body Corporate,-
It is set up or established under the laws of the Central or State Legislature.
The directors or the trustees, as the case may be, of such body corporate have not been convicted of any offence involving moral or any economic offense.
The directors or the trustees, as the case may be, of such body corporate, if any, is not involved in any litigation connected with the securities market which may have an adverse bearing on the business of the applicant.
Procurement of Grant Certificate from SEBI
Venture capital fund shall make investment in the venture capital undertaking as enumerated below:
Venture capital fund shall disclose the investment strategy at the time of application for registration;
Venture capital fund shall not invest more than 25% corpus of the fund in one venture capital undertaking;
Shall not invest in the associated companies
At least 75% of the investible funds shall be invested in unlisted equity shares or equity linked instruments.
Not more than 25% of the investible funds may be invested by way of :
Subscription to IPO of a venture capital undertaking whose shares are proposed to be listed are subject to lock-in period of one year;
Debt or debt instrument of a venture capital undertaking in which the venture capital fund has already made an investment by way of equity.
Winding up
A scheme of a venture capital fund set up as a trust shall be wound up,
When the period of the scheme, if any, mentioned in the placement memorandum is over;
If it is the opinion of the trustees or the trustee company, as the case may be, that the scheme shall be wound up in the interests of investors in the units;
If 75% of the investors in the scheme pass a resolution at a meeting of unit holders that the scheme be wound up; or
If the Board so directs in the interests of investors.
PLACEMENT MEMORANDUM
Contents of Placement Memorandum
Details of the trustees or trustee company
Tax implications
Manner of subscription
The period of maturity,
The manner of winding up;
Details of the fund manager or AMC
Investment strategy of the fund.
Circulation
"Circulation of Placement Memorandum
The placement memorandum referred to in regulation 16 may be issued for private circulation only after the expiry of twenty one days of its submission to the Board.
Effect of winding up
On and from the date of intimation, no further investments can be made on behalf of the scheme so wound up.
Within three months from the date of intimation under, the assets of the scheme shall be liquidated, and the proceeds accruing to investors in the scheme distributed to them after satisfying all liabilities.
INSPECTION AND INVESTIGATION- By SEBI
To ensure that the books of account, records and documents are being maintained by the venture capital fund in the manner specified in these regulations;
To inspect or investigate into complaints received from investors, clients or any other person, on any matter having a bearing on the activities of the venture capital fund;
To ascertain whether the provisions of the Act and these regulations are being complied with by the venture capital fund; and
To inspect or investigate into the affairs of a venture capital fund, in the interest of the securities market or in the interest of investors.
Before ordering an inspection or investigation under regulation 25, the Board shall give not less than ten days notice to the venture capital fund.
Possibility of Default
Contravenes any of the provisions of the Act or regulations;
Fails to furnish an information relating to its activity as venture capital fund as required by the Board;
Furnishes to the Board information which is false or misleading in any material particular;
Does not submit periodic returns or reports as required by the Board;
Does not co-operate in any enquiry, inspection or investigation conducted by the Board;
Fails to resolve the complaints of investors or fails to give a satisfactory reply to the Board in this behalf.
Dealt with in the manner provided in the SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002
Eligibility Criteria
If the application is made by a Company, -
It is prohibited by its memorandum and articles of association from making an invitation to the public to subscribe to its securities;
Its director or principal officer or employee is not involved in any litigation connected with the securities market which may have an adverse bearing on the business of the applicant;
If the application is made by a Trust, -
The instrument of trust should be in the form of a deed and must be duly registered under the provisions of the Indian Registration Act, 1908
The main objective of the trust is to carry on the activity of a venture capital fund;
The directors of its trustee company, if any, or any trustee is not involved in any litigation connected with the securities market which may have an adverse bearing on the business of the applicant;
If the application is made by a Body Corporate,-
It is set up or established under the laws of the Central or State Legislature.
The directors or the trustees, as the case may be, of such body corporate have not been convicted of any offence involving moral or any economic offense.
The directors or the trustees, as the case may be, of such body corporate, if any, is not involved in any litigation connected with the securities market which may have an adverse bearing on the business of the applicant.
Procurement of Grant Certificate from SEBI
Venture capital fund shall make investment in the venture capital undertaking as enumerated below:
Venture capital fund shall disclose the investment strategy at the time of application for registration;
Venture capital fund shall not invest more than 25% corpus of the fund in one venture capital undertaking;
Shall not invest in the associated companies
At least 75% of the investible funds shall be invested in unlisted equity shares or equity linked instruments.
Not more than 25% of the investible funds may be invested by way of :
Subscription to IPO of a venture capital undertaking whose shares are proposed to be listed are subject to lock-in period of one year;
Debt or debt instrument of a venture capital undertaking in which the venture capital fund has already made an investment by way of equity.
Winding up
A scheme of a venture capital fund set up as a trust shall be wound up,
When the period of the scheme, if any, mentioned in the placement memorandum is over;
If it is the opinion of the trustees or the trustee company, as the case may be, that the scheme shall be wound up in the interests of investors in the units;
If 75% of the investors in the scheme pass a resolution at a meeting of unit holders that the scheme be wound up; or
If the Board so directs in the interests of investors.
PLACEMENT MEMORANDUM
Contents of Placement Memorandum
Details of the trustees or trustee company
Tax implications
Manner of subscription
The period of maturity,
The manner of winding up;
Details of the fund manager or AMC
Investment strategy of the fund.
Circulation
"Circulation of Placement Memorandum
The placement memorandum referred to in regulation 16 may be issued for private circulation only after the expiry of twenty one days of its submission to the Board.
Effect of winding up
On and from the date of intimation, no further investments can be made on behalf of the scheme so wound up.
Within three months from the date of intimation under, the assets of the scheme shall be liquidated, and the proceeds accruing to investors in the scheme distributed to them after satisfying all liabilities.
INSPECTION AND INVESTIGATION- By SEBI
To ensure that the books of account, records and documents are being maintained by the venture capital fund in the manner specified in these regulations;
To inspect or investigate into complaints received from investors, clients or any other person, on any matter having a bearing on the activities of the venture capital fund;
To ascertain whether the provisions of the Act and these regulations are being complied with by the venture capital fund; and
To inspect or investigate into the affairs of a venture capital fund, in the interest of the securities market or in the interest of investors.
Before ordering an inspection or investigation under regulation 25, the Board shall give not less than ten days notice to the venture capital fund.
Possibility of Default
Contravenes any of the provisions of the Act or regulations;
Fails to furnish an information relating to its activity as venture capital fund as required by the Board;
Furnishes to the Board information which is false or misleading in any material particular;
Does not submit periodic returns or reports as required by the Board;
Does not co-operate in any enquiry, inspection or investigation conducted by the Board;
Fails to resolve the complaints of investors or fails to give a satisfactory reply to the Board in this behalf.
Dealt with in the manner provided in the SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002