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On August 19, 2024, the Securities and Exchange Board of India (SEBI) issued a circular outlining the process for Venture Capital Funds (VCFs) registered under the erstwhile SEBI (Venture Capital Funds) Regulations, 1996, to migrate to the SEBI (Alternative Investment Funds) Regulations, 2012. This migration offers VCFs flexibility in handling unliquidated investments after their scheme's tenure has expired.
Online Mock Test for NISM-Series-XIX-C: Alternative Investment Fund Managers Exam
Online Mock Test for NISM-Series-XIX-C: Alternative Investment Fund Managers Exam
Key Points:
Migration Opportunity: VCFs registered under the 1996 regulations can now migrate to the AIF Regulations, 2012, to be categorized as "Migrated Venture Capital Funds" (Migrated VCFs). The migration allows these funds to continue operations under more current regulatory frameworks.
Application Process: VCFs opting to migrate must submit an application to SEBI, including their original registration certificate and additional required information. The migration application must be completed by July 19, 2025.
Conditions for Migration:
- For Active Schemes: VCFs with active schemes (where the liquidation period hasn’t expired) can migrate with specific tenure conditions based on prior disclosures in the Private Placement Memorandum (PPM).
- For Expired Schemes: VCFs with expired but unwound schemes must resolve any pending investor complaints before migration and may receive a one-time additional liquidation period of one year, extending until July 19, 2025.
Post-Migration Provisions: Upon migration, the investments, investors, and units of the VCF will automatically transfer under the AIF Regulations. Additionally, Migrated VCFs must comply with SEBI's Master Circular for AIFs, including the preparation of a Compliance Test Report.
Non-Migration Consequences: VCFs that choose not to migrate will face enhanced regulatory scrutiny or potential regulatory action, especially if their schemes have expired without winding up.
Surrender of Registration: VCFs that have wound up all schemes or made no investments in unwound schemes must surrender their registration by March 31, 2025. Failure to do so will result in SEBI initiating actions to cancel their registration.
Some Multiple Choice Questions (MCQs) for NISM Exam Preparation:
What is the final date for Venture Capital Funds (VCFs) to apply for migration to AIF Regulations?
- A) December 31, 2024
- B) March 31, 2025
- C) July 19, 2025
- D) January 1, 2025Answer: C) July 19, 2025
Which document must VCFs submit along with their migration application to SEBI?
- A) Annual Report
- B) Original certificate of registration under VCF Regulations
- C) Financial Statements
- D) SEBI Compliance Test ReportAnswer: B) Original certificate of registration under VCF Regulations
What happens to VCFs that choose not to migrate to AIF Regulations?
- A) They automatically migrate
- B) They face enhanced regulatory reporting or action
- C) They get deregistered immediately
- D) They are exempt from SEBI regulationsAnswer: B) They face enhanced regulatory reporting or action
For VCFs with expired liquidation periods but unwound schemes, what is the additional liquidation period provided by SEBI?
- A) 6 months
- B) 1 year
- C) 2 years
- D) No additional period providedAnswer: B) 1 year
What must VCFs with unwound schemes and no investments do by March 31, 2025?
- A) Apply for a new certificate
- B) Surrender their registration
- C) Begin winding up
- D) File a complaint with SEBIAnswer: B) Surrender their registration