SEBI Tightens Angel Investment Norms In India
Angel funds are required to have a corpus of at least Rs 10 crore and minimum investment by an investor should be Rs 25 lakh.
“The manager or sponsor shall have a continuing interest in the angel fund of not less than two and half per cent of the corpus or Rs 50 lakh, whichever is lesser, and such interest shall not be through the waiver of management fees,” Sebi noted.
The regulator also stipulated that the fund must not have any family connection with the investee company and that no angel fund scheme have more than 49 investors.
The new norms would help in encouraging entrepreneurship in the country by financing small start-ups at a stage where such start-up finds it difficult to obtain funds from traditional sources of funding such as banks, financial institutions among others.
Finance Minister P Chidambaram in his budget speech had announced that SEBI would frame guidelines for angel investor pools by which they can be registered under AIF venture capital funds (VCF).
Under SEBI guidelines, AIFs already have sub-categories such as Venture Capital Funds, Social Funds and SME Funds.
Angel fund is likely to be a separate sub-category.
Regarding raising of funds by an individual investor, the person need to have an experience of 10 years and should possess assets of at least Rs 2 crore.
In case an investor is a corporate entity, it need to either have a net worth of Rs 10 crore or registered as AIF/ VCF with SEBI.
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