SEBI allows Pre-Emption
rights and Call/Put options
On 3 October 2013, SEBI has rescinded its earlier notification of March 2000
and has permitted contracts with – (a) Pre-emption Rights – ‘Right of First
Refusal’ (ROFR), Tag/Drag rights; and (b) Call/Put options; to be included in
Shareholder Agreements and Articles of Associations of Indian companies.
Please note this permission only has prospective effect and does not validate
any such contracts prior to 3rd October 2013. Also, exercise of call/put
options is subject to – (a) seller must have held the securities being sold
pursuant to call/put options continuously for at least one year from the
contract date; (b) sale price/consideration must be in compliance with
applicable laws; and (c) contract is settled by actual delivery of securities.
Further, all contracts with Pre-Emption and Call/Put Options shall be in
overall compliance with FEMA, 1999.
SEBI notifies Angel Funds
On 16 September 2013 SEBI has amendedSEBI (Alternative Investment Funds)
Regulations, 2012 (“Regulations”)
to notify a new sub-category ‘Angel
Funds’ under Category I-Venture Capital Funds. Angel Funds are
funds focused on investments in start-ups. These funds are focused on investing
in start-ups and typically such entities face difficulties in obtaining loan
from banks, financial institutions, etc.
Eligibility Conditions
for ‘Angel Investors’
The Regulations prescribe eligibility conditions of ‘Angel Investors’ as –
1.
an individual with net tangible assets of atleast Rs. 2
crores(excluding value of his principal residence) and who either has early
stage investment experience or experience as a serial entrepreneur or is a
senior management professional with atleast 10 years of experience; or
2.
a body corporate with a net worth of atleast Rs. 10 crores; or
3.
an Alternative Investment Fund registered under these Regulations
or a Venture Capital Fund registered under the SEBI (Venture Capital
Funds) Regulations, 1996.
Salient features of Angel
Funds
1.
Registration Fees – Rs. 2 lakhs only; whereas for other AIF funds fee is Rs. 5
lakhs.
2.
Fund Corpus – Angel Fund’s corpus shall be atleast Rs. 10 crores as against
Rs. 20 crores for other AIF categories. The minimum investments by an investor
shall be Rs. 25 lakhs and the funds are to be accepted for a maximum period of
3 years.
3.
Permitted Investments – Angel funds can invest only in Venture Capital Undertakings (VCU) that (a) have
been incorporated during the preceding 3 years; (b) have a turnover of less
than Rs. 25 crore; (c) are not promoted or sponsored by or related to an
industrial group with turnover that exceeds Rs. 300 crores; and (d) are not
companies with family connection to any of the investing Angel Investors.
4.
Investment Limits and
Lock-in Requirements –
Investment in any VCU shall not be less than Rs. 50 lakhs and shall not exceed
Rs. 5 crores. Investment in one VCU shall not exceed 25% of the total
investments under all Fund schemes. A lock-in of 3 years shall apply to such
investments.