The meeting of the Board of Directors of the Securities & Exchange Board of India was held on 23.1.2016, wherein certain important decisions were taken regarding Angel Funds, Foreign Portfolio Investors and corporate governance.
The highlights of the decisions are briefed herein below:
- Relaxation for Angel Funds
- Allowing FPIs to invest in unlisted Non-Convertible Debentures/Securitised Debt Instrument.
- Unlisted corporate debt securities in the form of non-convertible debentures/bonds issued by the India Public or Private Company. Investment in such instruments shall be subject to minimum residual maturity of 3 years and end use restriction on investments in Real Estate Business and Capital market and purchase of land.
- Securitized debt instruments including:
- Any certificate or the instrument issued by the special purpose vehicle set up for securitization of Banks/FIs or NBFCs as originators.
- Any certificate or instrument issued and listed in terms of SEBI (Public Offer and Listing of Securitised Debt Instruments) Regulation, 2008.
- Corporate Governance Issues in Compensation Agreements
- No employee including key managerial personnel, director or promoter of a listed entity shall enter into any agreement for himself or on behalf of any other person, unless prior approval has been obtained from the Board as well as public shareholders.
- All such agreements entered during the past three years from the date of notification shall be informed to the stock exchanges for public dissemination including those which may not be currently valid.
- Existing agreements entered into prior to the date of notification and which may continue to be valid beyond such date shall be informed to the stock exchanges and approval shall be obtained from public shareholders by way of an ordinary resolution in the forthcoming general meeting.
- Interested person shall not vote.
SEBI (Alternate Investor Funds) Regulation, 2012 (“AIF”) vis-à-vis Angel Funds are to be amended to widen the scope of Angel Funds. A comparative of the existing provisions and the new provisions is discussed below:
| Existing | Amendment |
| As per existing regulations, each scheme of the Angel Fund can have maximum of 49 Angel Investor. | The cap imposed on the number of angel investor in the scheme has been increased to 200. |
| Currently the Venture Capital Undertakings, which are in existence for not more than 3 years before the investment date are eligible as Investee entity (along with other criteria). | Now, the venture undertakings incorporated within 5 years are eligible to be Investee entity for Angel fund investments (alongside meeting the other criteria). This amendment brings the provision in par with the provision under DIPP. |
| The limit of investment by Angel Fund in venture capital undertaking has been minimum Rs. 50 lakh to Maximum of Rs. 5 Crore. | Now the minimum limit has been further reduced to Rs. 25 lakh and maximum continues to be same. |
| The investment made in any venture capital undertaking by Angel Fund is to be locked in for the period of 3 years. | The requirement of lock in period has been now reduced to 1 year. |
| Under existing AIF Regulations Angel Fund can invest only in the Venture Capital Undertaking, which as per definition is a domestic company. | Angel funds are now specifically allowed to invest upto 25% of their investible corpus in the overseas venture capital undertaking. |
For enhancing the investor base in unlisted debt securities and securitized debt instruments the Board has decided to allow FPIs to make investment in the following:
Further the limits prescribed has to be adhered to.
To curb the potential unfair practices relating to the compensation agreement entered into by the private equity fund for incentivizing promoters and Key Managerial Persons of listed investee companies. It has been decided to amend the Listing Regulations to incorporate the revised provision of disclosures and shareholders approval for all such agreements. Following are the norms of the revised disclosures: