Regulations for Foreign Venture Capital Investment

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Abstract:

This article gives a view on the Regulations for Foreign Venture Capital Investment. The Regulations for Foreign Venture Capital Investment were approved by SEBI and implemented in 2000.

Regulations for Foreign Venture Capital Investment at a glance-

Foreign Venture Capital Investment requires the registration from Securities and Exchange Board of India.

The SEBI board approved the Foreign Venture Capital Investment Regulations, which got implemented in the year 2000. The Securities and Exchange Board of India (SEBI) norms for Foreign Venture Capital Investment states that any enterprise or industrial unit which was to be set up outside India, and planning to make investment in a venture capital fund or venture capital undertaking, is liable to undergo a registration process with SEBI as Foreign Venture Capital Investment (FVCI).

Norms Set by SEBI for Foreign Venture Capital Investment-

The maximum limit of the FVCI investment in a single venture capital undertaking is 25 percent of the funds allotted to the investments in India

The investments for domestic venture funds should not be less than INR 5 lakhs from any investor along with a minimum capital fund of INR 5 crores.

A venture capital fund that wishes to follow the provisions of the IT Act has the liability to divest from the investment with one year from the setting up of venture capital undertaking

Some of the members of the SEBI board suggested for a afterthought on the time frame set for the listing of venture capital undertaking in order to avoid various operational limitations and optimize venture capital inflows in India

The new criteria for investment in Foreign Venture Capital as well as in the domestic investments demand a complete disclosure of the strategies taken up.

As per the regulations set by SEBI for Foreign Venture Capital, both the domestic and Foreign Venture Capital Investments should invest at least 75 percent of the allotted funds in the unregistered equity shares or equity-linked instruments

However for both domestic and FVCI, at least 75 per cent of the funds that can be invested will have to be invested in unlisted equity shares or equity-linked instruments.

Last Updated on 05/07/2011