How to Register for Venture Capital funds under SEBI? » Legal Window (2024)

Venture capital (VC) is a type of private equity investment offered by Venture Capital Firms or funds to start-ups, early-stage, and rising businesses that have shown high growth (in terms of number of workers, annual revenue, etc.).Let us discuss about Registration of Venture Capital Funds under SEBI in details.

Key Terms with regard to Registration of Venture Capital Funds under SEBI.

Before we look into the procedure for registration of venture capital funds under SEBI, let us understand some important terms.
These terms are as follows:
Alternative Investment Fund(AIF): The term “alternative investment fund” refers to a group of pooled investment funds that invest in venture capital, private equity, hedge funds, managed futures, and other types of investments. In simple terms, an AIF is a type of investment that is distinct from traditional investment options such as stocks, bonds, and other debt securities, which-

• Acts as a private pooled investment which for the purpose of collecting funds from investor, whether they are Indian or foreign, for investing it in accordance with investment policy.
• Is not falling under any SEBI, RBI regulations, or any other regulatory statutes.

Provided that following shall not be taken into account for purpose of regulations as AIF:

• Family setup or Family trust set up, which are created for the benefit of relative.
• ESOP Trusts which are set up according to SEBI regulations
• Any trust made for welfare of employees, for benefit of employee.
• Any holding company defined as per Companies Act, under Section 2(46).
• Form of fund which is managed by reconstruction company or any securitization company registered under RBI under the purview of 2(46) of Securitization and Reconstruction of Financial Asset and Enforcement of Security Interest Act, 2002.
• Any pool of fund which is regulated by any regulator in India.

It is one of important aspect for registration of venture capital funds under SEBI.

Venture Capital Fund : Venture capital (VC) is a type of private equity investments Venture Capital Firms or funds to startups, early-stage, and rising businesses that have shown high growth (in terms of number of workers, annual revenue, etc.)
It plays an important role in registration of venture capital funds under SEBI.

Venture Capital Undertaking : A domestic firm whose shares are not listed on a recognised stock exchange in India and is in the business of providing services or producing or manufacturing products in industries not specified by the Securities and Exchange Board of India is currently characterised as a venture capital undertaking.

Now, let us discuss about, How to get registration for a venture capital fund. Application along with all the required documents has to be send to SEBI in Form A by the Applicant. Applicant will receive the reply from SEBI within 21 working days on receipt of Application.

Documents required for registration purpose:

• Form A accompanied with Application fees of Rs. 100000.
• Copy of Memorandum and Article of Association is required in case the applicant is set up as company.
• Registered trust deed copy has to submit, in a case where applicant set up is in the form of trust
• Copy of main objective of constitution needs to be submitting, if the applicant is set up in form of corporate body.
• Copy of Investment management Agreement.

Details/Information required:

For registration purpose the applicant needs to submit some details/information of the following:

• Details/information of Sponsor/settlor.
• Information/Details of trustees/ Trustee Company.
• Details of Investment manager, Investment Advisor, Asset management company (AMC).

Details of sponsor/settlor

• Write up activity of the sponsor/ settlor, along with its shareholder pattern of the directors. In case of sponsor is an individual, information of individual regarding his position, whether he is director/employee of any entity under SEBI was there or not, has to be submit.
• Statement is requiring for checking whether the sponsor/ settlor acquired floated venture capital fund previously or not. If any then statement relating with the suspension of certificate under regulation 30 or cancellation under purview of regulation 31 is required.
• Statement is require for checking whether the sponsor has registration with SEBI,RBI or with any other authority and applicant will provide registration details(if any).
• Statement whether the sponsor or its holding company is listed on any stock exchange in India (if any).
• Statement related to the sponsor’s/ director’s liability or if they are involved in any legal proceeding related with the securities market and any judgment passed by court against them related to violation of securities law.

Details of Trustees

• Write up of activities of trustees.
• Moreover, Shareholding pattern along with write up of director’s profile.
• Statements regarding registration of Trustee Company under SEBI, RBI or any other authority.

Details of Investment Manager/ Investment Advisor/ AMC

• Write up of activities of Investment Manager, Investment Advisor, and AMC.
• Shareholding patterns
• Statement regarding registration of Investment manager/ Investment Advisor/AMC under SEBI, RBI or any other authority.
• Details of management team and also, state about their employment status with RBI, SEBI.

In addition to it, statement regarding, whether the applicant is registered with SEBI or if application for registration or any other capacity with SEBI has been submitted. Moreover, applicant will provide the list of all associates which have registration under SEBI along with their Registration Number.

Investment Strategy

Details of Investment strategy of the fund has to disclose under (Regulation 12a). Moreover, strategy should disclose the investment pattern or style, preferred sectors for investment, the class of investors of the fund along with other information.

Submission of Declaration

• Applicant should submit the declaration of undertaking under regulation 11(3) of SEBI regulations, 1996. In addition with,
• Declaration of Undertaking under Schedule to SEBI regulations, 1996.
• Declaration of ‘Fit and Proper Person” criteria according to regulation 4A of the SEBI Regulation, 1996, and as specified under Schedule 2nd of the SEBI Regulation 2008.
  Payment under Regulation 2

As soon as, the entire requirement including the Fit and Proper Person criteria is complete and information regarding the payment of registration fees of Rs.500000 is confirmed by SEBI, SEBI will issue the certificate of registration in favor of applicant.

Points to Ponder

• “The applicant” here means the company or entity looking for the registration as a venture Capital Fund.
• Any incomplete application which do not contain necessary documents/information/declaration therefore it will be consider as void or Application not filed and SEBI will not accept the application. SEBI will inform the applicant if, there application got reject.
• Applicant should fill all the document correctly and should also mention its signature on it.
• Authorization letter has to submit by Director of fund, in case of an Authorized signatory.

Ending Note

At last, we do not find any difficulty in saying that, taking cognizance of all the above mentioned points will help the applicant for successful registration of venture capital funds under SEBI. For avoiding any legal proceedings the applicants should keep in mind the regulations issued by the SEBI and other regulatory authority for getting registration successfully under SEBI regulations.