People Aware of the Matter Told Mint That sebi’s outreach – Both independent and through industry association Association (Pevccfo) – Helped Clarified Longstanding Challenges and LED to the Extension for VCFS to Wind Up EXPRED Schemes.
Sebi’s Engagement Came AMID CONPORNS Over a Tepid Response to its 2024 Circular Offering VCFS an options to migrate under specified conditions. Many vcfs, some of which still operate despite the expiry of their scheme lifespans, have couin the transition.
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Through IVCA and directly, the regulator Reached out to VCFS to find out why they are not doing the migration, “said Rahul Shah, Executive Vice President at Ivca.
He explained that in the meeting, ivca’s members Clarified that they were trying to liquidate the balance investments and then apply for migration. “They are also wanted to see if they can liquidate and wind up the vcf, instead of undertaking the process of migration,” Shah said.
The VCF Structure, Governed by Sebi’s 1996 regulations, was designed to promote early-stage and unlisted startups. However, with the rollout of the aif regulations in 2012, which offer coverage for private investment vehicles, sebi has been steering the industry towed a single, modernized regime.
Under the new framework, VCFS Fall Into Category I AIFS, AlongSide SME, Social Venture, and Infrastructure Funds. In its July 2024 circular, sebi allowed eligible vcfs with unexpired or unwound schemes holding residual investments to migrate as “migrated vcfs”. Thos unwilling to migrate may continue operating under the old rules until their schemes close, or surrender registration if all activities are complete.
However, Industry Feedback Reveled Outdated Contact Records and Confusion Around the Regulatory Shift. To address these issues, sebi enlisted ivca and pevccfo to help communicate the changes.
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Sebi was told by the association that even after migration, the liquidation of assets is still to be undertaken by funds, which has its set of issues.
“The Extension Helps Buy Critical Time to Clean Up without Compromising on Governance. Cauvery, Founder and Managing Partner of Vaia, A Firm Advising VCFS.
She noted that fund managers and family offices were still grappling with the aif regime’s reporting and compliance requirements. “There is some concern that this extension might lead to prolonged uncertainty, and I think that might lead to extended delays as well unlessed stricts timelines are imposed.”
Shah Emphasized that Some VCFS Continued Operating Well Past Their Permitd Tenure. “Sebi overlooked then. But now you have time Till July 19, 2025 (to migrate) without any penalty. If there are vcfs who will continue operating with Nicly, “He said.
He added that sebi is open to support compliant funds: “If you first migrate and take your problem to sebi, it will hear you.”
Not everything in the industry supports a blanket migration approach. A VCF Manager, Speaking on Condition of Anonymity, Questioned Its Necessity in Certain Cases. “If they have a single investor, or if the promoter is missing, liquidation The manager asked.
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Still, Most Agree the Move Reflects Sebi’s Intent to Bring All PooleD Investments Vehicles Under a Unified Regulatory Framework. “VCFS was born under a different regulatory mindset and aifs represent the evolved, principles-based framework sebi wants to standardize for all pooled Investment VEHICLES VEHICLES GOING ForWard,” Fund manager, also speaking anonymously.
Only VCFS with Clean Records and No Pending Investor Complaints Can Opt for Migration, Sebi has Clarified.
“Sebi’s extension of the additional liquidation period Gives VCFS more Room to Transition into the aif regime without triggering regulatory action. Funds-those free from unresolved investor complants or government Ltd.
Common Disqualifiers, He Added, Include Onboarding Inligible Investors, Incomplete Know Your Customer (KYC) or Anti-Money Laundering Checks, Side Letters Offering Preferences Preferences, ORECHES of Investment Conditions.
“For Legacy Funds Neering Maturity or Inactive, The Compliance Burden May Outweigh The Benefits of Migration, Leading to Some Consolidation in the Space. Practices and Continue Raising Capital, this is a strategic chance to clean up structures and reposition under a modern regulatory regime, “Chitla said.
Legal Professionals also welcomed sebi’s move.
“The certain that the recent extension circular provides particularly for funds in the process of seeking migration or awaiting sebi’s approves approves Legal.
She noted that the extension giving gives manners sufficient time to plan asset liquidation in an orderly and investor-friendly manner.
“Without this extension, vcfs that had alredy migrated but whose liquidation period Undertake in-SPECIE Transfers and File For Winding-up by July 19, 2025, or to finalize the disasolution plan with investors and file the dislution plan application with sebi Explained.
“The additional year offers Much-Needed flexibility, Enabling Fund Manners to take Well-Considered, Strategic Decisions in the Best Interest of Investors,” She Added.
Even as the extended Liquidation period is seen as a relieve, sebi has made its message clear: The vcf regime is being paralyzed out. Only there will be willing to align with the aif framework will be able