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Venture Capital Funds in India

In: Other Topics

Submitted By Anshalp
Words 1211
Pages 5
Investment Banking and Venture Capital
Assignment No:-2

Regulation of Venture Capital By SEBI

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What is Venture Capital?

Venture Capital financing is a process whereby funds are pooled in for a period of around 10 years and investing it in venture capital undertakings for a period of 3 to 5 years with an expectation of high returns. To protect the funds of the investors against the risk of losses, venture capital fund provides its expertise, undertake advisory function.

Venture Capital financing had been a popular source of funding in many countries and served as a lucrative bait to create a similar industry in India as well.

Regulations of Venture Capital:

VCF are regulated by the SEBI (Venture Capital Fund) Regulations, 1996. The regulation clearly states that any company or trust proposing to carry on activity of a VCF shall get a grant of certificate from SEBI. Section 12 (1B) of the SEBI Act also makes it mandatory for every domestic VCF to obtain certificate of registration from SEBI in accordance with the regulations. Hence there is no way that an Indian Venture Capital Fund can exist outside SEBI Regulations. However registration of Foreign Venture Capital Investors (FVCI) is not mandatory under the FVCI regulations.

A VCF and registered FVCI enjoy several benefits:

• No prior approval required from the Foreign Investment Promotion Board (FIPB) for making investments into Indian Venture Capital Undertakings (VCUs).

• As per the Reserve Bank of India Notification No. FEMA 32 /2000-RB dated December 26, 2000, an FVCI can purchase/ sell securities/ investments at a price that is mutually acceptable to the parties and there is no ceiling or floor restriction applicable to them.

• A registered FVCI has been granted the status of Qualified Institutional Buyer (QIB), so they can subscribe to the share capital of…...

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