(MENAFN- KNN India)
New Delhi, Nov 14 (KNN) The Securities and Exchange Board of India (Sebi) is making significant strides to reshape the startup ecosystem with a proposed overhaul of regulations governing angel funds.
In a bid to stimulate startup funding and make angel investments more accessible, Sebi is revising the rules to ease the norms surrounding angel funds, which could have transformative effects on India's startup landscape.
A key part of Sebi's proposal is the expansion of investor eligibility for angel funds. Traditionally, these funds have been structured as alternative investment funds (AIFs) and have largely been open to high-net-worth individuals (HNIs) and accredited investors.
However, Sebi is now considering allowing Hindu Undivided Families (HUFs), family trusts, and sole proprietorships to invest in angel funds, thereby broadening the pool of potential investors.
This change aims to democratise access to startup capital, offering greater funding opportunities to early-stage businesses that often struggle to attract investors due to the perceived risks involved.
Several regulatory adjustments are also part of Sebi's proposal, aimed at reducing barriers for investors. One of the most significant changes includes the removal of the minimum investment requirement of Rs 25 lakh, a move that would open the door for a larger and more diverse group of investors.
Additionally, Sebi plans to lower the investment threshold for employees and directors of angel funds to Rs 5 lakh to ensure alignment of interests with the success of the startups they fund.
Further changes include relaxing the 25 per cent diversification limit on investments, allowing angel funds to concentrate investments in fewer startups, and raising the investment cap in a single startup from Rs 10 crore to Rs 25 crore.
These changes are designed to foster larger and more strategic investments in promising startups. Sebi's proposed regulatory changes are in line with the government's recent steps to support the startup ecosystem, such as the abolition of the "angel tax."
Together, these measures aim to foster a more vibrant and well-funded startup environment, enhancing innovation and entrepreneurship across India. By lowering entry barriers for investors and encouraging larger investments, Sebi's move signals a bright future for India's startup sector.
(KNN Bureau)
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