Restrictions on Investment and Corpus of the Scheme

23. (1) In case of Venture Capital schemes, the minimum size of the corpus shall be USD 3 Million, and the total corpus shall not exceed USD 200 Million. (2) Venture Capital scheme may invest in its associate,subject to the prior approval of seventy-five per cent. (75%) investors in the scheme by value. (3) Venture Capital schemes shall invest at least 80 per cent. (80%) of the corpus in Investee Companies where not more than ten (10) years have elapsed since incorporation of such companies, or other schemes which meet such requirement. 7 [Provided that a Venture Capital scheme may further invest during the subsequent round(s) of fund raising in such Investee Companies where ten (10) years have elapsed since incorporation of such companies, subject to the following conditions: (i) The subsequent investment(s) in such Investee Companies shall be in accordance with the investment objectives and investment strategy of the scheme, provisions of its placement memorandum and internal policies of the FME in this matter; (ii) In case of exclusion of an investor in an Investee Company, either by choice of the investor or the FME, in accordance with the placement memorandum and contribution agreement, such investor shall not be allowed to participate in the subsequent round(s) of investment in such company; and (iii) The contribution by the scheme in any subsequent round should be limited to the extent that the post-issue beneficial interest (on a fully diluted basis) of the scheme in such Investee Company does not exceed its pre-issue beneficial interest (on a fully diluted basis) therein.] (4) Venture Capital schemes shall not buy or sell securities from associates, other schemes of the FME or its associates, or an investor who has committed to invest at least fifty per cent. (50%) of the corpus of the scheme, unless prior approval has been obtained from seventy-five per cent. (75%) investors in the scheme by value: Provided that the voting process shall exclude such investor(s) who has committed to invest at least fifty per cent. (50%) of the corpus of the scheme and is buying or selling the securities, from or to the scheme: Provided further that such approval from investors may not be required for a fund of funds scheme which has disclosed in its placement memorandum the details of the underlying scheme(s) wherein the investments are intended to be made and the nature of association, if any, that the FME has with the manager(s) of such underlying scheme(s). 8 [(5) The FME shall ensure that any differential distribution rights to investors through issuance of senior and junior or subordinate units in a Venture Capital scheme shall be in accordance with the framework as may be specified by the Authority. Explanation. – “senior units” indicate such class of units which has superior rights over the distribution proceeds of the Venture Capital scheme, while “junior units” or “subordinate units” indicate such classes of units, including mezzanine units, the rights of which over the distribution proceeds of the scheme would be inferior to that of senior units.]