The Securities and Exchange Board of India (SEBI) has recently announced a significant change in the timeline for alternative investment funds (AIFs) and venture capital funds (VCFs) making overseas investments. In an effort to enhance efficiency and utilization of funds, SEBI has reduced the validity of approval for such investments from six months to four months.
Unutilized Limits to be Reallocated
SEBI also clarified that if AIFs and VCFs fail to make their investments within the given four-month period, the unutilized limits of the funds will be allocated to other applicant AIFs and VCFs. This move aims to ensure that available investment limits are utilized optimally and provide better opportunities for the industry.
Background: Circular Issued Last Year
The new regulations will apply to overseas investment approvals given by SEBI to applications after the issuance of the circular. Last year in August, SEBI issued a circular that allowed AIFs and VCFs to make overseas investments without requiring an India connection. Previously, companies were required to have at least one office in India to be eligible for investment from these funds.
Recommendation from Advisory Committee
The decision to reduce the validity period was taken after SEBI received recommendations from the Alternative Investments Policy Advisory Committee. The intention behind the change is to ensure a more streamlined and time-bound process for overseas investments.
With the revised timeline, AIFs and VCFs now have four months from the date of prior approval from SEBI to make their allowed investments in overseas undertakings. These measures are aimed at promoting efficient allocation of funds and fostering growth in the AIF industry.
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