Redraw VC fund rules: Desai Panel

The expert committee on venture capital funding under the chairmanship of Nitin Desai has suggested that the government remove the present restriction on domestic and foreign venture funds that requires them to limit their investment in a single venture capital undertaking at 25 per cent.

The expert committee on venture capital funding under the chairmanship of Nitin Desai has suggested that the government remove the present restriction on domestic and foreign venture funds that requires them to limit their investment in a single venture capital undertaking at 25 per cent.

The committee which submitted its report to the government today has listed out a slew of recommendations that are important to finance technology and knowledge centric projects through venture capital funding and lifting of restrictions in investments is one such recommendation.

Added to this, the committee, has recognised and recommended that venture funds and other financing institutions, particularly those that channel government funding, should encourage entrepreneurship promotion and education scheme designed to find, assist and train new technology entrepreneurs.

In terms of taxation exemptions, the committee has asked the government that capital gains be exempted on exit of unlisted companies for registered VC funds. It has also pointed out the need to remove the minimum capitalisation requirements which would inturn enable smaller funds that essentially provide seed capital to start up ventures to operate in India.

In order to provide greater flexibility as tax transperancy, the expert committee has asked the government to suitably amend the Companies Act that would enable the creation of limited liability corporations.

On the legislative front, the committee says that the special rights negotiated by venture funds with the undertakings they finance should be made enforceable through changes in legislation.

These recommendations are primarily aimed at increasing flows of venture funds for technology ventures particularly those emanating from incubation centres of universities and R038;D institutions.

Story continues below this ad

In that regard, the committee says that universities should provide lab facilities to their alumni to help them to take forward their project ideas.