SEBI has also mandated that angel funds declare their first close within 12 months of regulatory approval, with at least five accredited investors onboard
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ABEER KHAN
The Securities and Exchange Board of India (SEBI) has overhauled the regulatory framework for angel funds, tightening fundraising norms aimed at enhancing risk reduction and improving ease of doing business.
Angel funds granted SEBI registration after the circular issued on Wednesday, shall on-board and offer investment opportunities to accredited Investors only. The minimum number of accredited investors needed for angel funds has also been raised to five from three.
Funds registered after September 10, 2025 must exclusively onboard accredited investors, while existing funds have until September 8, 2026 to transition. During this period, they cannot accept more than 200 non-accredited investors and must gradually phase them out.
SEBI has also mandated that angel funds declare their first close within 12 months of regulatory approval, with at least five accredited investors onboard. Those missing the deadline will have to refile their placement documents with the regulator.
Operational ease
Investment processes have also been streamlined. Angel funds will no longer need to launch separate schemes or file term sheets with SEBI for each deal. Instead, investments must be made directly at the fund level, though detailed records must be maintained.
Follow-on investments in existing portfolio companies are permitted, but capped at ₹25 crore per company. A minimum lock-in of one year applies, reduced to six months if shares are sold to third parties.
For the first time, angel funds have been reclassified as a standalone Category I AIF, rather than a sub-category under venture capital funds. They must also adhere to performance benchmarking and disclosure norms, with annual compliance audits mandatory for funds investing over ₹100 crore.
Published on September 10, 2025