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Sebi announces new guidelines for AIFs, VC funds for investing abroad

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The Securities and Exchange Board of India (SEBI) has come out with new guidelines for Alternative Investment Funds (AIFs) and Venture Capital Funds (VCFs) for investing abroad, under which overseas investee firms won't need to have an Indian connection. Under the rules, AIFs can invest in securities of companies incorporated outside India. Besides, VCFs are allowed to invest in off-shore venture capital undertakings. Earlier, overseas investments were allowed only in companies with an Indian connection - for instance, a company with a front office overseas, with its back office operations in India. AIFs or VCFs are now allowed to invest in an overseas investee company, incorporated in a country whose securities market regulator is a signatory to the International Organisation of Securities Commission's (IOSCO) Multilateral Memorandum of Understanding or a signatory to the bilateral Memorandum of Understanding with SEBI. AIFs or VCFs will have to apply to SEBI for allocation of overseas investment limit. If an AIF/VCF liquidates investment made in an overseas investee company previously, the proceeds received from such liquidation shall be available for reinvestment.