SEBI Announces Settlement Scheme for VCFs Unable to Wind Up Due to Unliquidated Investments After Repeal of 1996 Regulations

The Securities and Exchange Board of India (SEBI) has announced the Venture Capital Funds (VCF) Settlement Scheme 2025 in a bid to provide options of resolution to VCFs that were unable to wind up their schemes due to their possession of unliquidated investments even after the repeal of the SEBI (Venture Capital Funds) Regulations, 1996.

The announcement of the scheme was informed to the general public through a notice on SEBI’s official website today, July 15, 2025.

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Following the promulgation of the SEBI (Alternative Investment Funds) Regulations, 2012, the earlier VCF Regulations of 1996 stood repealed. However, VCFs registered under the older framework were allowed to remain governed by the repealed regulations until their existing funds or schemes were wound up completely.

Since the repeal of the 1996 regulations, several VCFs encountered challenges in liquidating their investments within their tenure of the scheme, resulting in the continuation of unliquidated assets even after the expiry of the prescribed periods.

To address these difficulties, SEBI amended the AIF Regulations on July 20, 2024 and issued a Circular dated August 19, 2024, setting out detailed modalities for the migration of VCFs registered under the erstwhile VCF Regulations to the newer AIF Regulations.

Under this mechanism, VCFs were required to apply to SEBI for migration as a "Migrated Venture Capital Fund" by submitting their original registration certificate, detailed information about their structure, schemes, and unliquidated assets, and ensuring compliance with conditions including the absence of pending investor complaints.

The circular also clarified that a one-time additional liquidation period of one year from the date of notification of the amendment would be available, giving such funds until July 19, 2025, to wind up their legacy schemes.

The VCF Settlement Scheme 2025 has thus been introduced to provide a last opportunity to VCFs that still hold unliquidated investments even after migration and whose schemes’ liquidation periods have expired.

The scheme is open to VCFs with at least one such scheme, provided they have completed the migration process.

The Scheme shall be valid from July 21, 2025 to January 19, 2026. Applications may be made in the specified format available on SEBI’s website and accompanied by a non-refundable fee of ₹25,000 plus 18% Goods and Services Tax (GST). All settlement payments are to be made through the designated payment gateway available on SEBI’s online portal.

Stakeholders may note that the following settlement amounts are required to be paid for holding unliquidated investments of investors beyond the tenure of the fund/scheme:

All costs and settlement expenses must be borne solely by the investment manager or sponsor, with no recovery from the fund, scheme, or investors. The final date for application is January 19, 2026, unless otherwise notified by SEBI.

SEBI has also warned that any VCFs that have not wound up, continue to hold unliquidated assets and continue to remain within the ambit of the repealed regulations even after the expiry of the migration deadline on July 19, 2025 may face action from the regulatory body.

SEBI has announced that it will publish a set of Frequently Asked Questions on its website starting July 21, 2025, to address queries and assist applicants with the settlement process.

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