SEBI Reduces Overseas Investment Timeline For Alternative Investment, Venture Capital Funds To Four Months

The market regulator stated that it will allocate the unutilised limits of the funds to other applicant AIFs and VICs, if the funds fail to make their investments within the given time period. 

The new regulations will apply to the overseas investment approvals given by SEBI to applications post the issuance of the circular. 

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Securities and Exchange Board of India (SEBI) on Friday reduced the validity of approval granted to alternative investment funds (AIFs) and venture capital funds (VCFs) for making overseas investments from six months to four months.

As per a Moneycontrol report, the market regulator stated that it will allocate the unutilised limits of the funds to other applicant AIFs and VCFs, if the funds fail to make their investments within the given time period. 

Last year in August, the watchdog issued a circular allowing AIFs and VCFs to make overseas investments without an India connection. Prior to that, it was important for the companies to have at least one office in India to be eligible to receive investment from these funds. 

These guidelines were released on August 17, 2022. In its framework for overseas investment by funds, the watchdog had noted, “AIFs/VCFs shall invest in an overseas investee company, which is incorporated in a country whose securities market regulator is a signatory to the International Organization of Securities Commission’s Multilateral Memorandum of Understanding (Appendix A Signatories) or a signatory to the bilateral Memorandum of Understanding with SEBI.”

But as per the latest circular issued on Friday, the AIFs and VCFs will now have a time limit of four months instead of six from the date of prior approval from SEBI to make the allowed investments in overseas undertakings. 

The market regulator made the changes after receiving recommendations from the Alternative Investments Policy Advisory Committee. It noted that these changes have been made so that “the allocated limit is utilised efficiently and, if unutilised, the same is again available to the AIF industry in a shorter time span”.

It further noted that the new regulations will apply to the overseas investment approvals given by SEBI to applications post the issuance of the circular.