The Security and Exchange Board of India (SEBI) issued the letter to Ankur Fincom Private Limited and clarified that each scheme of an angel fund is an independent scheme with its own set of investors.
The subject matter was related to the request for interpretive letters under the Securities and Exchange Board of India (Informal Guidance) Scheme, 2003 in connection with the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012- by Ankur Fincon Management Pvt Ltd.
The Ankur Fincom Private Limited wrote a letter dated January 13, 2020, to SEBI so as to issue a clarification on the queries.
Firstly it was asked whether the intent of the Angel Fund Regulations is to provide the option for investors to selectively participate in each Scheme of the Angel Fund.
“Regulation 19G(3) of the SEBI (Alternative Investment Funds) Regulations, 2012, requires the manager of Angel Fund to obtain undertaking of the angel investor confirming his approval before investing the amount of said investor in any venture capital undertaking. Therefore, insofar as an investment in angel funds is concerned, the investors may selectively participate in each scheme of the Angel Fund,” the SEBI clarified.
Secondly, whether each scheme of an Angel Fund is an independent vehicle with its own set of investors, who have approved to be part of such scheme.
While addressing the query, the SEBI said, “in accordance with Regulation 19E(1) of the SEBI (Alternative Investment Funds) Regulations, 2012 and SEBI Circular dated June 29, 2018, Angel Funds may launch schemes subject to the filing of Term Sheets for their schemes. Further, the format of the Term Sheet as provided under the said Circular requires an Angel Fund to specify the name of the scheme, name of Investee Company, a number of investors, total capital committed by investors, capital drew by the fund, etc. Therefore, each scheme of an Angel Fund is an independent scheme with its own set of investors, who have approved to be part of such scheme.”
Thirdly, whether an investor who does not approve to participate in a particular scheme, they are ring-fenced from that scheme investment under Angel Fund Regulations.
“An investor in an Angel Fund, who does not grant specific approval to participate in a particular scheme, is not an investor in that particular Scheme. Thus, if an investor has not given approval for investment in any particular investee company, the said investor would not be part of that scheme concerning the said investee company. Therefore, for the purpose of compliance with the provisions of SEBI (Alternative Investment Funds) Regulations, 2012, with regard to Angel Fund, investors in each Scheme are ring-fenced from the activities of the other Schemes of the Angel Fund, in which they have not participated,” the SEBI clarified.
Fourthly, When an investor cannot participate in a scheme due to regulatory limitations, they will be ring-fenced from that scheme investment under Angel Fund Regulations. Whether by doing so, they will not be in noncompliance for their investments in other schemes where they have approved, as each scheme is independent under Angel Fund Regulations.
“Each scheme of an Angel Fund is an independent scheme with its own set of investors, who have approved to be part of such scheme. In this regard, for the purpose of compliance with SEBI (Alternative Investment Funds) Regulations, 2012, the investor would be ring-fenced from other investment Schemes of the Angel Fund for which he has not given approval. However, with regard to other schemes in which an investor is willing to invest, he may do so in those schemes after giving approval for investment in such schemes subject to compliance with provisions of SEBI (Alternative Investment Funds) Regulations, 2012 and other applicable laws,” SEBI said.
Subscribe Taxscan Premium to view the Judgment
