VCF Migration Process: The Securities and Exchange Board of India (Sebi) has detailed the process and conditions for Venture Capital Funds (VCFs) seeking to transition to Alternative Investment Funds (AIF) regulations. This follows Sebi’s decision in July to allow VCFs, which were registered before the implementation of AIF regulations, to switch to the new framework by becoming “migrated venture capital funds”.
Transition from VCF to AIF
As per the Sebi circular issued on Monday, venture capital funds can now opt to migrate to AIF regulations for managing unsettled investments after the expiry of the AIF rules. This option will remain available till July 19, 2025. A “migrated venture capital fund” refers to a venture capital fund that moves into a sub-category of Category I – Alternative Investment Fund, as defined under the AIF rules. Sebi has specified that venture capital funds seeking to migrate must submit their original registration certificate and such additional details as may be required by the regulator.
Liquidation extension in progress
For VCFs with active schemes, Sebi said those whose settlement period is still underway can be migrated, and the tenure of the scheme will continue as initially reported or be modified with the approval of investors.
If the winding-up period has expired, these funds must not have any unresolved investor grievances and will be granted an additional year (up to July 19, 2025) to complete winding-up. Post-migration, existing investors, investments and units will be governed by AIF regulations without any change, Sebi noted. Venture capital funds that choose not to migrate will face stricter reporting requirements. Those with lapsed schemes may be subject to regulatory action.
Improved reporting for VCFs
The circular further clarified that RCFs whose liquidation period has not expired will be subject to enhanced reporting requirements similar to those applying to AIFs.
Meanwhile, VCFs with expired liquidation periods but continuing their operations will face regulatory action. VCFs that have liquidated all their schemes or have stopped making fresh investments must submit their registration by March 31, 2025, Sebi said.(With contributions from Reuters)
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