SEBI’s Informal Guidance regarding Angel Investors

Under the SEBI (Alternative Investment Funds) Regulations, 2012 (‘AIF Regulations’), the minimum net worth criteria prescribed for individual investors and body corporates, in order to be considered as eligible “angel investors”, is ₹ 2 crore (approx. US$ 270,000) (excluding the value of the individual investor’s principal residence) and ₹ 10 crore (approx. US$ 1.4 million), respectively. Further, the AIF Regulations oblige a manager to obtain an undertaking from every angel investor confirming his approval prior to making investment in a venture capital undertaking. Through its informal guidance dated September 17, 2020 to Lets Venture Advisors LLP, SEBI has clarified that a limited liability partnership (‘LLP’) and its partners being distinct persons, the net-worth of the individual partners cannot be attributed to the LLP for the purpose of satisfying the ₹ 10 crore (approx. US$ 1.4 million) net worth criteria for body corporates. SEBI has also clarified that waiver of the requirement of obtaining angel investor’s approval prior to making investment in a venture capital undertaking, is not permissible.

Published In:Inter Alia - Quarterly Edition - September 2020 [ English
Date: September 30, 2020