SEBI Revises Framework for Angel Funds: New Norms for Accredited Investors

The Securities and Exchange Board of India (SEBI) has introduced a revised framework for angel funds, aligning them with the alternative investment funds rules. Key among these changes is the stipulation that only accredited investors can participate in these funds, which marks a significant shift in the way funds can raise capital.

Existing angel funds have until September 8, 2026, to comply. During this period, they are restricted to offering investment opportunities to no more than 200 non-accredited investors. Notably, angel funds must acquire at least five accredited investors to declare their first close, within 12 months of SEBI acknowledging their Private Placement Memorandum (PPM). Investment procedures have also been streamlined by eliminating the need to launch schemes or file traditional term sheets with SEBI.

SEBI's updated circular further stipulates a one-year lock-in for investments, with options to reduce it to six months under specific conditions. The new regulations aim to fortify compliance, distinguishing angel funds as Category I AIFs while ensuring full disclosure of investment data for benchmarking and performance evaluations.

(With inputs from agencies.)