SEBI has, by way of Circular dated August 17, 2022 (‘Circular’), introduced certain guidelines for overseas investment by Alternative Investment Funds (‘AIFs’)/ Venture Capital Funds (‘VCFs’). The Circular introduced the following specifications with respect to overseas investments:
i. AIFs/VCFs are required to submit an application to SEBI in a specified format for allocation of overseas investment limit. Trustee/board/designated partners of AIFs/VCF are required to provided certain undertakings as specified in the Circular with respect to the proposed overseas investment;
ii. The requirement of the overseas investee company to have an Indian connection has been done away with;
iii. The overseas investee company is required to be incorporated in a country whose securities market regulator is a signatory to the international organization of securities commission’s multilateral memorandum of understanding or a signatory to the bilateral memorandum of understanding with SEBI;
iv. The overseas investee company cannot be from a country identified in the public statement of financial action task force (‘FATF’) as a: (a) jurisdiction having a strategic anti-money laundering or combating the financing of terrorism deficiencies to which counter measures apply; or (b) jurisdiction that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with FATF to address the deficiencies;
v. If an AIF/VCF liquidates investment made in an overseas investee company previously, the sale proceeds received from such liquidation to the extent of investment made in such overseas investee company, would be available to all AIFs/VCFs (including the selling AIF/VCF) for reinvestment; and
vi. AIFs /VCFs must:
- Transfer/sell the investment in overseas investee company only to the entities eligible to make overseas investments, as per the extant guidelines issued under the Foreign Exchange Management Act, 1999.
- Furnish the sale/divestment details of the overseas investments to SEBI on a prescribed email address in a specified format within three working days of the divestment, for updating the overall limit available for overseas investment by AIFs/VCFs.
- Report all overseas investments sold/divested till date to SEBI on a prescribed email address and in a specified format within 30 days from the date of the Circular.