To boost start-up funding in the country, the Securities and Exchange Board of India (Sebi) on Wednesday eased norms for angel funds, allowing them to invest in up to five year old start-ups.
The regulator has eased the lock-in requirements to one year from three years for angel funds and has cut their minimum investment threshold from Rs 50 lakh to Rs 25 lakh. Sebi has also allowed angel funds to invest in overseas venture capital undertakings up to 25 per cent of their investible corpus in line with other Alternative Investment Funds (AIFs). The regulator has also increased the upper limit of number of angel investors in a scheme from 49 to 200.
Currently, 266 AIFs are registered with Sebi, of which, 84 are registered under Category I, including four angel funds.
Apart from this, Sebi also barred private equity firms and their investee companies from entering into any compensation agreements with the promoters, directors or key officials of listed investee firms without prior approval of board and public shareholders.
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“No employee including key managerial personnel, director or promoter of a listed entity shall enter into any agreement for himself or on behalf of any other person, with any shareholder or any other third party with regard to compensation or profit sharing unless prior approval has been obtained from the board as well as public shareholders,” said Sebi in a release after the meeting of its board. Sebi said that all such agreements entered during the past three years from the date of notification will need to be communicated to the stock exchanges for public dissemination, including those which may not be currently valid.
The regulator in its board meet also decided to permit foreign portfolio investors (FPIs) to invest in unlisted corporate debt securities and securitised debt instruments with a ceiling of Rs 35,000 crore with an aim to deepen capital markets. According to the amendment to the FPI regulations, approved by the Sebi board, FPIs will be allowed to invest in unlisted non-convertible debentures and securities debt instruments.
Currently, investment in unlisted debt securities is permitted only in the case of companies in the infrastructure sector.
“Investments in the unlisted corporate debt securities shall subject to minimum residual maturity of three years and end use-restriction on investment in real estate business, capital market and purchase of land. The expression ‘Real Estate Business’ shall have the same meaning as assigned to it in Foreign Exchange Management Regulations…,” said Sebi. Sebi has also permitted FPI investment in securitised debt instruments, including certificate or instrument issued by a special purpose vehicle (SPV) set up for securitisation of asset with banks and other financial institutions and any certificate or instrument issued and listed in compliance of Sebi rules.