WHAT IS ANGEL INVESTOR FUND ?

According to the SEBI AIF Regulations[1], angel investors can be individuals or companies who meet the certain defined criteria.

1. What are Angel Investors?

• Chapter IIIA of SEBI(AIF) Regulation, 2012[2] consists of Angel fund.
• An Individual Angel Investor[3] is any person who proposes to invest in an angel fund and who has net tangible assets of at least two crore rupees excluding value of his principal residence, and who either possesses an experience in an early stage investment or as a serial entrepreneur or as a senior management professional with at least ten years of experience.

• How individual Angel Investors can invest in India?

• Applicants have to first seek registration as an AIF. Alternative Investment Fund or AIF means any fund established or incorporated in India which is a privately pooled investment vehicle which collects funds from sophisticated investors, whether Indian or foreign, for investing it in accordance with a defined investment policy for the benefit of its investors.

• For the purpose of angel investors, applicant can seek registration as an AIF in Category 1. Category 1 consists of Venture capital funds (Including Angel Funds), SME Funds, Social Venture Funds and Infrastructure funds. Angel funds is a sub-category of venture capital fund under Category I AIFs which was introduced by SEBI in 2013 to boost entrepreneurship for financing small start-ups.

• What is the process of registration?

• In order to get registered applicant shall make an application to SEBI in form A, which is duly filled, signed and stamped along with an application fees of Rs. 1,00,000 by way of bank draft in favour of the SEBI, payable at Mumbai and other necessary documents as demanded in the Regulation 2012. On receipt of such application, the applicant shall receive a reply from SEBI within 21 working days.

• The applicant must mention along with details in the cover letter as to whether if applicant is previously registered with SEBI as Venture Capital Fund, if he has been undertaking activities of an AIF or is applying for a new fund.

• An online application must also be made in terms of the guidelines as prescribed by SEBI.

• If the SEBI is satisfied that the applicant fulfils all the requirements then it shall approve and application. On receipt of approval, the applicant must pay a registration fees of Rupees 5 lakhs (if not already registered with SEBI as a Venture Capital Fund) or a re- registration fees of Rupees 1 lakh to SEBI by way of bank draft on favour of The SEBI payable at Mumbai (Investment Management Department Division of Funds- 1 Securities and Exchange Board of India SEBI Bhavan, 3rd Floor A Wing, Plot No. C4-A, ‘G’ Block, Bandra-Kurla Complex, Bandra (E), Mumbai – 400 051.). On payment of such fees, SEBI will grant certificate of registration as an AIF.

• What is the limit specified for number of investors?

• In case of an angel fund, no scheme shall have more than two hundred[4] angel investors.

• What is the amount of Corpus?

• Angel Funds shall have a corpus of at least Rs. 5 crore[5] and minimum investment by an investor shall be Rs. 25 lakhs (may be accepted over a period of maximum five[6] years). Further, the continuing interest by sponsor/manager in the Angel Fund shall be not less than 2.5% of the corpus or Rs. 50 lakhs, whichever is lesser.

• Whether public can be invited to subscribe to AIF?

• No, AIFs are privately pooled investment vehicles. AIFs shall raise funds through private placement by the issue of information memorandum or placement memorandum, by whatever name called.
• Units of angel funds shall not be listed on any recognised stock exchange[7].

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[1] https://www.sebi.gov.in/sebi_data/attachdocs/1471519155273.pdf

[2]https://thc.nic.in/Central%20Governmental%20Regulations/Securities%20&%20Exchange%20Board%20of%20India%20(Alternative%20Investment%20Funds)%20Regulations,2012.pdf

[3]  Regulation 19A(2) of the AIF Regulations.

[4] SEBI (Alternative Investment Funds) (Amendment) Regulations, 2016, w.e.f. 04-01-2017.

[5] Substituted by the SEBI (Alternative Investment Funds)(Amendment) Regulations, 2018, w.e.f. 01-06-2018. Prior to the substitution, it read as “ten”.

[6] Substituted by the SEBI (Alternative Investment Funds)(Amendment) Regulations, 2018, w.e.f. 01-06-2018. Prior to the substitution, it read as “three”.

[7] Regulation 19H of the AIF Regulations.

NOTE FOR FOUNDERS: If you are an early stage startup looking for seed fund and having an inspiring product and team, you may write to 4xangelinvestors@gmail.com