Types of Venture Capital
A Trust Fund
Registered under India Trust Act, 1882.
Set up for a specific task and wound up on completion.
Funds are entrusted to Trustees.
2 tier structure – Trust & Investors.
3 tier structure – Trust, AMC, investors.
Venture Capital Company
Investors are the shareholders.
Registered with SEBI.
VC companies are more tax efficient.
Enjoyed tax benefits only on long-term capital gains. (1988)
Exemption to dividend income from equity investment (1995)
ILFS Venture Capital Company Ltd. is an example of such a form. It is Organized on the pattern of the usual company form, the liability of the shareholders is limited.
Off Shore Entity
Offshore VC fund can invest either directly or through a vehicle set in India.
Have to follow FDI guidelines.
A Scheme of Unit Trust of India
The VCFs are floated as schemes of the UTI, which subscribes to their corpus in collaboration with other institutions/organisations.
The venture capital funds are constituted as Venture Capital Unit Schemes (VECAUSs).
They enjoy the tax exemptions available to UTI
UTI Sponsored institution :
TDICI (Technology Development and Information Company of India) Ltd.
RCTC (Risk Capital and Technology Finance Corporation) Ltd.,
A Division of Financial Institution
The venture capital fund is set up as a division and not as an independent legal entity.
Eg.: IDBI Venture Capital Fund Scheme
Canara Bank Venture Capital Fund (CVCF)