SEBI Unveils Rules To Streamline Foreign Venture Capital Investor Registration Framework

The Securities and Exchange Board of India has unveiled rules to streamline the framework for Foreign Venture Capital Investors registration. The process of granting registration to FVCIs and processing other post-registration references has been assigned to designated depository participants, according to provisions prescribed for foreign portfolio investors.

An applicant seeking registration as an FVCI is required to engage a DDP in order to obtain a registration certificate as FVCI. The DDP and the custodian of the FVCI shall be the same entity at all times.

SEBI is currently processing applications for granting registration to FVCIs and related due diligence.

"No person shall buy, sell or otherwise deal in securities as a foreign venture capital investor unless it has obtained a certificate granted by a designated depository participant on behalf of the Board (SEBI)," the regulator said in a notification issued on Sept. 6.

FVCIs are required to appoint a domestic custodian to monitor investment of FVCIs in India, furnish periodic reports and other information to SEBI under the current rules.

Going by the notification, "a foreign venture capital investor or a global custodian acting on behalf of the foreign venture capital investor shall enter into an agreement with a designated depository participant and a custodian, before making any investment under these regulations".

In addition, the regulator has made additions to the eligibility criteria for FVCI whereby resident Indians/non-resident Indians/overseas citizen of India can be constituent of the applicant.

This is subject to conditions, such as contribution of a single NRI/ OCI/ RI should be below 25% of the total contribution in the corpus of the applicant; the aggregate contribution by them should be below 50% of the total contribution in the corpus of the applicant; and they should not be in control of the applicant.

According to current norms, an investment company, investment trust, pension fund, investment partnership, mutual fund, endowment fund, charitable institution, university fund or any other entity incorporated outside of India; And an asset management company, investment management company, investment manager or any other investment vehicle incorporated outside India, could apply for registration as an FVCI.

Also, FVCIs are required to hold their investments in demat form. To give this effect, SEBI has amended FVCIs rules that will come into force with effect from Jan. 1, 2025.

FVCI is an investor incorporated and established outside India, who invests primarily in unlisted securities of Venture Capital Undertakings and Venture Capital Funds. As of March 2023, a total of 269 FVCIs are registered with SEBI. Further, the cumulative investments made by FVCIs directly in investee companies stood at Rs 48,286 crore during the period.

(With Inputs From PTI)