In a significant move aimed at facilitating smoother transitions within the Indian investment fund landscape, the Securities and Exchange Board of India (SEBI) has issued an important update regarding the migration of Venture Capital Funds (VCFs) to the SEBI (Alternative Investment Funds) Regulations, 2012 (AIF Regulations). This update comes through a recent circular dated August 19, 2024, which lays down the modalities for such migration.
The circular specifically addresses the regulatory pathway for VCFs that intend to migrate to the AIF regime, while also clarifying the conditions under which such migration can take place. This includes detailed instructions related to VCFs that are currently managing schemes beyond their prescribed liquidation periods.
Key Highlights of the Circular
A critical provision in Paragraph 5 of the original circular pertains to VCFs with at least one scheme that has not yet been wound up, despite the expiry of its liquidation period as defined under Regulation 24(2) of the erstwhile VCF Regulations. Recognizing the practical challenges faced by such funds, SEBI had earlier allowed these VCFs additional time to manage their liquidation process post-migration.
Original Relief Period: Till July 19, 2025
Specifically, Paragraph 5.2 of the circular provided that VCFs with such expired-but-unwound schemes, upon migration to the AIF Regulations, would be granted an extended liquidation period until July 19, 2025. This concession was a significant relief for fund managers facing constraints in winding up older schemes within originally stipulated timelines.
Extended Relief: New Deadline – July 19, 2026
However, following industry representations and subsequent consultations, SEBI has now further extended this deadline. In a recent clarification, the regulator has decided to extend the additional liquidation period to July 19, 2026, giving VCFs one more year to complete the winding-up process of legacy schemes after their transition to the AIF framework.
No Change in Migration Application Deadline
Despite this extension, SEBI has made it clear that the last date for applying for migration to the AIF regime remains July 19, 2025. VCFs eligible and interested in migrating must ensure that their applications are submitted before this cut-off date. The extension of the liquidation period should not be misconstrued as an extension of the migration window itself.
