Investment by migrated venture capital fund

19AD. (1) Investments by migrated venture capital fund shall be subject to the following conditions:—

(a) the migrated venture capital fund shall not invest more than 25% corpus of the fund in a single venture capital undertaking;

(b) the migrated venture capital fund may invest in the securities of companies incorporated outside India subject to such conditions or guidelines that may be stipulated or issued by the Reserve Bank of India and the Board from time to time;

(c) The migrated venture capital fund shall not invest in the associated companies; and

(d) the migrated venture capital fund shall invest as enumerated below:

(i) at least 66.67% of the investable funds shall be invested in unlisted equity shares or equity linked instruments of venture capital undertaking;

(ii) not more than 33.33% of the investable funds may be invested by way of:

(a) subscription to the initial public offer of a venture capital undertaking whose shares are proposed to be listed;

(b) investment in the debt or debt instrument of a venture capital undertaking in which the venture capital fund has already made an investment by way of equity;

(c) preferential allotment of equity shares of a listed company subject to a lock in period of one year;

(d) investment in the equity shares or equity linked instruments of a financially weak company or a sick industrial company whose shares are listed.

Explanation. — For the purpose of these regulations, a “financially weak company” means a company, which has at the end of the previous financial year, accumulated losses, which has resulted in the erosion of more than 50% but less than 100% of its net worth at the beginning of the previous financial year;

(e) investment in the Special Purpose Vehicles that are created by a venture capital fund for the purpose of facilitating or promoting investment in accordance with these regulations.

Explanation. — The investment conditions and restrictions stipulated in clause (d) of sub-regulation (1) shall be achieved by the venture capital fund by the end of its life cycle.

(2) The migrated venture capital fund may enter into an agreement with the merchant banker to subscribe to the unsubscribed portion of the issue or to receive or deliver securities in the process of market making under Chapter IX of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 and the provisions of sub-regulation (1) shall not apply in case of acquisition or sale of securities pursuant to such subscription or market making.

(3) Notwithstanding the conditions as specified in sub-regulations (1) and (2), the Board may specify additional requirements or criteria for investments by the migrated venture capital funds.