Capital markets regulator Sebi has allowed India-registered various funding funds (AIFs) and enterprise capital funds (VCFs) to take a position in overseas entities with out having an India connection. Earlier, one of many circumstances was that such abroad investments have been allowed solely in these firms which had an Indian connection. Like, an organization has a entrance workplace abroad, whereas having its again workplace operations in India. “The requirement of the overseas investee company to have an Indian connection… has been done away with,” Sebi has mentioned in a round.
The regulator, nevertheless, mentioned that no such investments may be made in firms primarily based in jurisdictions recognized by the Financial Action Task Force (FATF) as these having anti-money laundering (AML) or combating the financing of terrorism (CFT) deficiencies. Moreover, AIFs or VCFs shall be allowed to take a position in an abroad investee firm, which is included in a rustic whose securities market regulator is a signatory to the International Organization of Securities Commission’s (IOSCO) Multilateral Memorandum of Understanding or a signatory to the bilateral pact with Sebi.
These are a part of the brand new tips issued by the Securities and Exchange Board of India (Sebi) for AIFs and VCFs that may make investments overseas. Commenting on the transfer, Karthik Reddy, Chairperson, IVCA and Co-founder & Managing Partner, Blume Ventures mentioned, “we are pleased to see that Sebi is lending a kind ear to the industry’s requests for more flexibility in a very dynamic global environment. ODI (offshore derivative instrument) for domestic venture capital funds has become an important need, to help Indian entrepreneurs compete with the best in the world.” He, additional, mentioned that the trade is eagerly wanting ahead to Sebi’s request to RBI being authorized, to reopen the ODI restrict. “We are also hoping to see AIFs be allowed to utilize their ODI limits under automatic route, similar to mutual funds,” he added.
As per the recent tips, AIFs or VCFs should file an utility earlier than Sebi for allocation of abroad funding restrict in the format. “If an AIF/VCF liquidates investment made in an overseas investee company previously, the sale proceeds received from such liquidation, to the extent of investment made in the said overseas investee company, shall be available to all AIFs/VCFs for reinvestment,” the regulator mentioned.
Further, AIFs or VCFs will promote the funding in abroad investee firms solely to the entities eligible to make abroad investments. AIFs or VCFs should furnish the divestment particulars of the abroad investments to the capital markets regulator in a specified format inside three working days for updating the general restrict accessible for abroad funding by these entities. Also, all of the abroad investments offered/divested by them until date, may even be reported to Sebi inside 30 days.
AIFs are funds for the aim of pooling in capital from Indian and overseas traders for investing as per a pre-decided coverage, whereas VCF is an AIF which invests primarily in unlisted securities of startups, early-stage enterprise capital undertakings primarily concerned in new merchandise, new providers, know-how or mental property proper primarily based actions or a brand new enterprise mannequin.
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