SEBI Guidelines for Overseas Investments by Venture Capital Funds

Last updated: 10 September 2007

Guidelines for Overseas Investments by Venture Capital Funds

CIRCULAR NO. SEBI/VCF/CIR NO. 1/ 98645 /2007, DATED 9-8-2007

1. SEBI registered Venture Capital Fund (VCFs) are permitted to invest in securities of foreign companies in terms of regulation 12(ba) of the SEBI (Venture Capital Funds) Regulations 1996. Reserve Bank of India (RBI) vide its Circulars dated April 30, 2007 and May 04,2007, issued in this regard, has permitted these VCFs to invest in equity and equity linked instruments only of off-shore venture capital undertakings, subject to overall limit of USD 500 million and applicable SEBI regulations.

2. Accordingly, SEBI registered VCFs, desirous of making investments in offshore Venture Capital Undertakings may submit their proposal for investment (in the attached format) to SEBI for its prior approval. It is clarified that no separate permission from RBI is necessary in this regard.

3. For the purpose of such investment, it is clarified that -

"Offshore Venture Capital Undertakings" means a foreign company whose shares are not listed on any of the recognized stock exchange in India or abroad.
Investments would be made only in those companies which have an Indian connection (i.e. company which has a front office overseas, while back office operations are in India) and such investments would be upto 10% of the investible funds of a VCF.
The allocation of investment limits would be done on 'first come- first serve' basis, depending on the availability in the overall limit of USD 500 million.
It is clarified that in case a VCF who is allocated certain investment limit, wishes to apply for allocation of further investment limit, the fresh application shall be dealt with on the basis of the date of its receipt and no preference shall be granted to it in fresh allocation of investment limit.
An applicant VCF shall have a time limit of 6 months for making allocated investments in offshore venture capital undertakings. In case the applicant does not utilize the limits allocated in the stipulated period of 6 months from the date of its approval, SEBI may allocate such unutilized limit to other VCFs/applicants whose applications are pending with it.

4. These investments would be subject to necessary amendments to Notification No. FEMA120/RB-2004 dated July 7, 2004 [Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004], and will also be governed by the related directions issued by the RBI from time to time.

5. This circular is being issued in exercise of the powers conferred under subsection (1) of Section 11 of the Securities and Exchange Board of India Act, 1992 and is without prejudice to compliances/permissions/approvals, if any, required under any other law.

Annexure

Proposal for Overseas Investment by Venture Capital Funds

Securities and Exchange Board of India Mumbai

Name of the Venture Capital Fund
SEBI Registration No.
Amount proposed to be invested in Offshore Venture Capital Undertaking -in USD
Total Investible corpus of the Fund -in USD.
Name and Address of the branch of the bank through which Foreign Currency Transaction are proposed to made

Declaration:

1. Board of Trustees/Trustees have exercised due diligence with respect to the investment decision.

2. Boards of Trustees/Trustees are satisfied that the proposed investments in foreign companies are consistent with the investment objective of the scheme.

A resolution to the above effect has been passed by the Boards of Trustees/Trustees on

Name:

Signature:

Place:

Date: