The biggest departure from today's regulations (which apply only to Venture funds) is that registration is mandatory for all people raising funds for investment. The previous position was that one could register as a venture fund if one wanted benefits (tax, takeover and IPO benefits exist) - but such registration was optional.
The new law will divide AIFs into three kinds a) those which deserve special treatment (e.g. those that invest in small companies, infrastructure projects or venture companies) whether tax or otherwise. b) those which don't deserve special treatment but will not be highly regulated since they pose no systemic risk as they are not allowed to leverage with borrowings c) funds which intend to use complex strategies or leverage which may pose a systemic risk - these will have the heaviest burden.
The new law does not have any major issues - in fact almost a dozen major issues raised by us (we sent a comment letter to SEBI) seem to have been addressed. However, this position is not clear, because we have not yet seen the actual regulations. There might be problems in the wordings of the regulations which we are not yet aware of. Let's keep our fingers crossed, hoping SEBI will not over-regulate funds - which play a vital role in supply of capital to young and hungry companies.
See previous posts:
Alternative investment funds AIF regulations - Finsec comments
SEBI comes out with a proposed regulatory regime for AIF
2 comments:
Mr. Parekh. Reg 3 of the VCF Regs, 1996 state Any company or trust or a body corporate proposing to carry on any activity as a venture capital fund on or after the commencement of these regulations shall make an application to
the Board for grant of a certificate.
Any company or trust or a body corporate, who on the date of commencement of these regulations is carrying any activity as a venture capital fund without a certificate shall make an application to the Board for grant of a certificate within a period of three months from the date of such commencement: Provided that the Board, in special cases, may extend the said period upto a maximum of six months from the date of such commencement.
In view of this, please explain this:
The biggest departure from today's regulations (which apply only to Venture funds) is that registration is mandatory for all people raising funds for investment. The previous position was that one could register as a venture fund if one wanted benefits (tax, takeover and IPO benefits exist) - but such registration was optional.
Excellent comment and here is your reply and source from SEBI's website:
"Registration of VCF is not mandatory under VCF Regulation. Not all players in the VCF or PE industry are registered with SEBI. These unregistered entities are not
subject to investment restrictions which are applicable to registered VCFs."
http://www.sebi.gov.in/commreport/alternativeinvestment.pdf
Sandeep
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