DEPUTY GENERAL MANAGER ALTERNATIVE INVESTMENT FUND AND FOREIGN PORTFOLIO INVESTOR DEPARTMENT DIVISION OF POLICY AND DEVELOPMENT

informal_guidance · 1992 · State unknown

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Parent: THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 (7c4c1f5343adab106c3a94cafc08a5ecf5957ae7)

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DEPUTY GENERAL MANAGER ALTERNATIVE INVESTMENT FUND AND FOREIGN PORTFOLIO INVESTOR DEPARTMENT DIVISION OF POLICY AND DEVELOPMENT AFD/PoD/OW/2024/3685 January 24 , 2024 Mrs. Gandhimadhy Varadarajan, LetsVenture Advisors LLP, Investment Manager of LV Angel Fund , No. – 51, Indiqube Penta, 5 th Floor, Wing – B, Richmond Road, Shanthala Nagar, Bangalore – 560025. Dear Sir, Sub: Request for Informal Guidance by way of interpretive letter under the provisions of the Securities and Exchange Board of India (Informal Guidance) Scheme, 2003 in connection with provisions for Angel funds under the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012 Ref: Your letter dated September 07, 2023 In your letter / communication under reference , you have , inter -alia , stated the following – 1.1. LV Angel Fund ("Fund") is registered with SEBI as a Category I – Venture Capital Fund – Angel Fund with Registration No. IN/AIF1/18-19/0585 dated September 06, 2018 . 1.2. The Fund being registered on September 06, 2018 will be completing 5 years' tenure by September 06, 2023. The Fund has certain angel investors who have under-utilized the threshold amount of INR 25 Lakh within the period of five years as mentioned in Regulation 19D (3) of Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012 ('AIF Regulations') . 1.3. There have been scenarios where the Fund has invested into a start -up complying with the minimum amount requirement under Regulation 19F(2) of AIF Regulations and the start -up owing to several reasons (such as flipping to foreign jurisdictions, change in business line etc.,) restructure to form a new legal entity. As the original investors of the start -up, the Fund gets an offer to mirror the shareholding in t

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1 · 1. LV Angel Fund ("Fund") is registered with SEBI as a Category I – Venture Capital Fund – Angel Fund with Registration No. IN/AIF1/18-19/0585 dated September 06, 2018 .

1 · 2. The Fund being registered on September 06, 2018 will be completing 5 years' tenure by September 06, 2023. The Fund has certain angel investors who have under-utilized the threshold amount of INR 25 Lakh within the period of five years as mentioned in Regulation 19D (3) of Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012 ('AIF Regulations') .

1 · 3. There have been scenarios where the Fund has invested into a start -up complying with the minimum amount requirement under Regulation 19F(2) of AIF Regulations and the start -up owing to several reasons (such as flipping to foreign jurisdictions, change in business line etc.,) restructure to form a new legal entity. As the original investors of the

1 · 4. The Fund, being an Angel Fund, files the term sheet specified in Annexure 15 of Master Circular dated July 31, 2023 for AIFs, containing all the material information within ten days of launching the scheme. There have been scenarios where changes in a few particulars like amount of investment, addition or deletion of investors, total capital commitment by investors or any other particular mentioned under Annexure 15 of the Master Circular, result in change or modifications in the commercial arrangements after the launch of scheme or filing of term sheet.

3 · 1. Regulation 19D(3) of AIF Regulations states as under:

3 · 2. AIF Regulations do not specify any provision for extension of the 5-year period for accepting funds from angel investors specified under Regulation 19D(3) of AIF Regulations. Therefore, the said 5-year period cannot be extended any further.

3 · 3. Regulation 19F(2) of AIF Regulations states as under:

3 · 4. In terms of Regulation 19F(2) of AIF Regulations, the minimum amount to be invested in a venture capital undertaking/start-up is INR 25 Lakh. Therefore, whenever an Angel fund makes a new or fresh investment in a separate entity (venture capital undertaking/startup), it shall not be less than INR 25 Lakhs. However pursuant to an initial investment made in a venture capital undertaking/start-up, if the Fund is receiving any shares in another venture capital undertaking/start-up due to reasons such as restructuring and no new transaction of fresh investment is being made, then the requirement of minimum INR 25 Lakhs investment may not be applicable .

3 · 5. As per para 15.3 of the Master Circular dated July 31, 2023 for Alternative Investment Funds:

3 · 6. As per part C of Annexure 15 of the Master Circular dated July 31, 2023, Angel Funds are required to submit details of only material changes in the term sheet, in the following format:

3 · 7. Considering that changes in term sheet are pursuant to change in terms of investment, Angel Funds are required to submit the (revised) term sheet and material changes in the same, if any, as soon as the said change has happened and in any case, before making any investment pursuant to the revised terms of investment .

3 · 8. As per paragraph 8(iv) of the Informal Guidance Scheme, SEBI may not respond to requests where the applicable legal provisions are not cited by the applicant . Since the applicable legal provisions are not cited and the AIF Regulations do not have any reference to the concept of 'sub-schemes' , no response has been provided for Query IV.