As traditional venture capital funds seek innovative alternatives, the looming SEBI migration deadline approaches
The Securities and Exchange Board of India (SEBI) has introduced a new regulatory framework for Venture Capital Funds (VCFs) in India, replacing the SEBI (VCF) Regulations, 1996, with the SEBI (Alternative Investment Funds) Regulations, 2012. This change requires all legacy VCFs registered under the 1996 regulations to migrate to the Alternative Investment Funds (AIF) structure by July 19, 2025.
Under the new regime, VCFs have the option to migrate into the AIF regime under a new category called Migrated Venture Capital Funds (MVCFs). This category includes funds with positive spillover effects on the economy, such as small and medium-sized enterprise funds and social venture funds. The migration process offers incentives like simple re-registration, fee waivers, and tailored compliance, but the uptake has been low.
The deadline for these funds means that they will not be allowed to raise new capital unless they transition to the AIF structure. Funds that have wound up all their schemes or have no investments are advised to surrender their registration. Some funds established before 2012 are seeking to comply or wind up due to the regulatory mandate and the need for industry cleanup.
The decision to comply with the new regime is driven by SEBI’s intent to consolidate all funds under the modern AIF umbrella, ensuring regulatory clarity and oversight. The deadline forces underperforming or non-compliant legacy VCFs to either migrate or surrender their registration, leading to an industry cleanup. With the deadline nearing, some funds are exploring innovative compliance strategies to manage their transition smoothly.
The new regulatory regime aims to provide a structured framework for fund governance, investor protection, and asset resolution, while also encouraging a modernization of the investment landscape in India. However, the specific details about the new regulatory regime are not provided in the current paragraph.
Meanwhile, the Securities and Exchange Board of India has not provided specific details about the curbs on derivatives trading aimed at deterring retail investors. The paragraph also does not mention any new agency status for the Securities and Exchange Board of India. SEBI has granted IPO nod to PE-backed Veeda and True North-backed Seedworks, but the paragraph does not contain any advertisements.
As the deadline approaches, venture capital funds in India are facing a significant decision: to comply with the new regulatory framework or to wind up their operations. The choice they make will have a significant impact on the Indian investment landscape and the future of these funds.
In light of the approaching deadline, venture capital funds in India are faced with a crucial decision: either to comply with the new regulatory framework by migrating to the Alternative Investment Funds (AIF) structure as Migrated Venture Capital Funds (MVCFs) or to wind up their operations. This choice will significantly shape the Indian investment landscape and the future of these funds.
The migration process offers incentives like simple re-registration, fee waivers, and tailored compliance, but the uptake has been low, indicating a need for innovative compliance strategies as the deadline nears.
