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Sebi proposes allowing only accredited investors in angel funds, relaxations in norms

Business Line  

A consultation paper from the capital markets regulator Securities and Exchange Board of India (Sebi) has recommended allowing only accredited investors to invest in angel funds.Such investors have to meet net-worth criteria verified by a third-party accreditation agency. Angel funds will conduct their first close by onboarding a minimum of five accredited investors, within 12 months from the date of Sebi communication for taking their private placement memorandum on record. Existing angel funds will get a year to meet the accredited investor requirement.The regulator has also mooted several relaxations pertaining to angel fund investments.The requirement of having a minimum fund corpus of INR 5 crore will be done away with. The minimum investment by an angel fund in a startup will be lowered to INR 10 lakh from INR 25 lakh, and the maximum investment limit will be raised to INR 25 crore from INR 10 crore. The 25% diversification limit for angel funds will be done away with.The lock-in requirement for investment by angel funds in a startup may be reduced to six months from the current one year in case the fund sells the investment to a third party. Angel funds may be allowed to make follow-on investments in its existing portfolio investee company, which is no longer a startup.