SEBI Shortens Time Limit for AIFs and Venture Capitals to Invest Overseas to 4 Months

The circular was issued under Section 11(1) of the SEBI Act, 1992.

As per the markets watchdog, the order was issued to protect the interests of investors as well as to regulate and promote the development of the securities market. Last August, Sebi issued guidelines that allowed AIFs and VCFs to invest in overseas companies without an India connection. Until then, they could only invest in companies that had atleast one India office.

The announcement:

The Securities and Exchange Board of India (SEBI) on Friday slashed the validity period of approval granted to alternative investment funds (AIFs) and venture capital (VC) funds to make overseas investments from six months to four months.

The circular is available on SEBI website at www.sebi.gov.in under the categories "Legal framework -Circulars" and "Info for -Alternative Investment Funds".

More details about the move:

If these funds fail to make investments within this time limit, then Sebi can allocate their unutilized limits to other applicant AIFs and VCs.

The decision has been taken considering into account the recommendation of the Alternative Investments Policy Advisory Committee

Capital markets regulator.

Under the previous rule, "AIFs and VCFs have a time limit of six months from the date of prior approval from SEBI to making the allocated investments in offshore venture capital undertakings".

In case the applicant AIFs and VCFs does not utilise the limits allocated to them within six months then Sebi can allocate such unutilized limit to another applicant.

The new framework will apply to the overseas investment approvals granted by Sebi following the issuance of this circular.

The new validity period will be applicable to approvals granted by SEBI post the issuance of the circular.

Statement from SEBI:

"It has been decided to reduce the aforesaid time limit for making overseas investments by AIFs/VCFs from six months to four months so that the allocated time limit is used efficiently and if unutilized, the same is again available to the AIF industry in a shorter span of time," SEBI said.

Meanwhile, the government had agreed to use money lying with the Securities and Exchange Board of India (Sebi) to repay Sahara depositors last week.