venture capital in india sebi foreign vc investor regs 2000
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THE GAZETTE OF INDIA EXTRAORDINARYPUBLISHED BY AUTHORITY
SECURITIES AND EXCHANGE BOARD OF INDIANOTIFICATION
MUMBAI, SEPTEMBER 15TH, 2000SECURITIES AND EXCHANGE BOARD OF INDIA
(FOREIGN VENTURE CAPITAL INVESTOR) REGULATIONS, 2000 S.O. 832(E) In exercise of the powers conferred by sub-section(1) section 30 of the Securities andExchange Board of India Act, 1992 (15 of 1992) the Securities and Exchange Board of India hereby,makes the following regulations namely:-.
CHAPTER I (Preliminary) l CHAPTER II (Registration Of Foreign Venture Capital Investors) l CHAPTER III (Investment Conditions And Restrictions) l CHAPTER IV (General Obligations And Responsibilities) l CHAPTER V (Inspection And Investigation) l CHAPTER VI (Procedure For Action In Case Of Default) l First Schedule - Form (A,B) l Second Schedule l Third Schedulel
Securities and Exchange Board of India - Acts, Rules & Regulations
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Short title andcommencement
1. (1) These regulations may be called the Securitiesand Exchange Board of India (Foreign VentureCapital Investor) Regulations, 2000.
(2) They shall come into force on the date of theirpublication in the Official Gazette.
Definitions 2(1) In these regulations, unless the contextotherwise requires, -
(a) "Act" means the Securities and Exchange Boardof India Act, 1992 (15 of 1992);
(b) "certificate" means a certificate of registrationgranted by the Board under regulation 7.
(c) "designated bank" means any bank in India whichhas been permitted by the Reserve Bank of India toact as banker to the Foreign Venture Capital Investor.
(d) "domestic custodian" means a person registeredunder the Securities and Exchange Board of India(Custodian of Securities) Regulations, 1996.
(e) "enquiry or investigating officer" means an enquiryor investigating officer appointed by the Board, underregulation 16.
(f) "equity linked instruments" includes instrumentsconvertible into equity share or share warrants,preference shares, debentures compulsorilyconvertible into equity.
(g) "foreign venture capital investor" means aninvestor incorporated and established outside India,which proposes to make investment in venture capitalfund(s) or venture capital undertakings in India and isregistered under these Regulations.
(h) "form" means any of the forms set out in the FirstSchedule.
(i) "investible funds" means the fund committed forinvestments in India net of expenditure foradministration and management of the fund.
(j) "negative list" means a list of items as specified inThird Schedule.
(k) "Schedule" means a schedule annexed to theseregulations;
THE GAZETTE OF INDIA
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(l) "Venture Capital Fund" means a Fund establishedin the form of a Trust, a company including a bodycorporate and registered under Securities andExchange Board of India (Venture Capital Fund)Regulations, 1996, which
(i) has a dedicated pool of capital;
(ii) raised in the manner specified under the Regulations;and
(iii)invests in venture capital undertaking in
accordance with the Regulations. (m) "venture capital undertaking" means a domestic
whose shares are not listed in a recognised stockexchange in India;
(ii) which is engaged in the business ofproviding services, production ormanufacture of articles or things, but doesnot include such activities or sectorswhich are specified in the negative list bythe Board, with approval of CentralGovernment, by notification in the OfficialGazette in this behalf."
(2) Words and expressions used and not defined in theseregulations but defined in the Act or Securities andExchange Board of India (Venture Capital Funds)Regulations, 1996 shall have the same meaning as arerespectively assigned to them in the Act or the saidregulations.
THE GAZETTE OF INDIA
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REGISTRATION OF FOREIGN VENTURE CAPITAL INVESTORSApplication for grant ofcertificate
3. For the purposes of seeking registration underthese regulations, the applicant shall make anapplication to the Board in Form A along with theapplication fee as specified in Part A of the SecondSchedule to be paid in the manner specified in Part Bthereof.
Eligibility Criteria 4. (1) For the purpose of the grant of a certificate toan applicant as a Foreign Venture Capital Investor,the Board shall consider the following conditions foreligibility, namely:-
the applicants track record, professionalcompetence, financial soundness, experience,general reputation of fairness and integrity.
whether the applicant has been grantednecessary approval by the Reserve Bank ofIndia for making investments in India; or
whether the applicant is an investmentcompany, investment trust, investmentpartnership, pension fund, mutual fund,endowment fund, university fund, charitableinstitution or any other entity incorporatedoutside India; or
whether the applicant is an asset managementcompany, investment manager or investmentmanagement company or any other investmentvehicle incorporated outside India; or
whether the applicant is authorised to invest inventure capital fund or carry on activity as aventure capital fund; or
whether the applicant is regulated by anappropriate foreign regulatory authority or is anincome tax payer; or submits a certificate fromits banker of its or its promoters track recordwhere the applicant is neither a regulated entitynor an income tax payer.
the applicant has not been refused a certificateby the Board.
whether the applicant is a fit and proper person.h.
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Furnishing of information,clarification
5. The Board may require the applicant to furnishsuch further information, as it may considernecessary.
6. An application which is not complete in all respectsshall be rejected by the Board:
Provided that, before rejecting any such application,the applicant shall be given an opportunity to remove,within thirty days of the date of receipt ofcommunication, the objections indicated by theBoard.
Provided further that the Board may, on beingsatisfied that it is necessary to extend the periodspecified above may extend such period not beyondninety days.
Procedure for grant ofcertificate
7. (1) If the Board is satisfied that the applicant iseligible for the grant of certificate, it shall send anintimation to the applicant.
(2) On receipt of intimation, the applicant shall pay tothe Board, the registration fee specified in Part A ofthe Second Schedule in the manner specified in PartB thereof.
(3) The Board shall on receipt of the registration feegrant a certificate of registration in Form B.
Conditions of certificate 8. The certificate granted to the foreign venturecapital fund under regulation 7 shall be inter-alia,subject to the following conditions, namely:-
(a) it shall abide by the provisions of the Act, andthese regulations;
(b) it shall appoint a domestic custodian for purposeof custody of securities;
(c) it shall enter into arrangement with a designatedbank for the purpose of operating a specialnon-resident rupee or foreign currency account.
(d) it shall forthwith inform the Board in writing if anyinformation or particulars previously submitted to theBoard are found to be false or misleading in anymaterial particular or if there is any change in theinformation already submitted.
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Procedure wherecertificate is not granted
9. (1) On considering an application made underregulation 3, if the Board is of the opinion that acertificate should not be granted, it may reject theapplication after giving the applicant a reasonableopportunity of being heard.
(2) The decision of the Board to reject the applicationshall be communicated to the applicant.
Effect of refusal to grantcertificate
10. Any applicant whose application has beenrejected under regulation 9 shall not carry on anyactivity as a Foreign Venture Capital Investor.
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INVESTMENT CONDITIONS AND RESTRICTIONSInvestment Criteria for aForeign Venture CapitalInvestor
11. All investments to be made by a foreign venturecapital investors shall be subject to the followingconditions:-
it shall disclose to the Board its investment strategy.a.
while it can invest its total funds committed in oneventure capital fund it shall however not invest morethan 25% of the funds committed for investments toIndia in one Venture Capital Undertaking.
it shall make investments in the Venture CapitalUndertaking as enumerated below:
(i) atleast 75% of the investible funds shall be invested inunlisted equity shares or equity linked instruments.
(ii) not more than 25% of the investible funds may beinvested by way of:
(a) subscription to initial public offer of a venture capitalundertaking whose shares are proposed to be listed subjectto lock-in period of one year;
(b) debt or debt instrument of a venture capital undertakingin which the venture capital fund has already made aninvestment by way of equity.