The larger purpose of amendments was to liberalize angel funds instead of narrowing them down, says G Mahalingam, Whole Time Member at the AIF repairman – SEBI.
Why SEBI raised the upper limit of angel investors investing in a scheme?
The said provision was inserted to be in-line with the Companies Act, 1956 wherein, over 50 investors in a company would make it deemed public. Since this provision has been changed in the Companies Act, 2013 to 200 shareholders, the AIF Regulations are amended to allow a scheme to have up to 200 angel investors.
Would raising the investible limit to fiveyear- old companies drive more investments?
This will help deploy more money for the betterment of the sector. It was to align with the start-up definition that DIPP announced earlier in 2016 saying that entities incorporated within five years are start-ups. Isn’t Rs 25 lakh as a minimum investment can be a great alternative to bank finance?
It is for angel funds to invest in companies which have smaller capital requirements. If you are going to limit it to Rs 50 lakh and above then small businesses with the lesser capital requirement will fall out from that ambit. So, we want to bring them under that.
Why SEBI reduced the lock-in period to one year?
Let’s say an angel fund invests in a company and that company has taken off well. This means when the fund’s purpose of investing in a company serves its objective, they would want to shift their investments to some other company. This way, more companies and angel funds benefit. As far as allowing up to 25 per cent of their fund corpus to invest overseas is concerned, it will give them a diversification benefit.
Would SEBI regulate sidecar funds for angel networks?
Sidecar structure is more like a private contract where there are only two parties, but when there is pooling of funds from investors, there is a need for regulation to look into it. Hence it is not coming under regulatory purview.
How does SEBI see online fund raising platforms?
SEBI in its press release has cautioned investors against using online platforms which are allowing trading of securities without complying with the provisions of Securities Contract (Regulation) Act, 1956 (SCRA) and
the Companies Act, 2013. SEBI doesn’t want gullible investors to lose money. It is also asking investors to invest only through SEBI recognized stock exchanges and intermediaries