At its 210th meeting held in Mumbai, the SEBI Board approved a comprehensive revamp of the regulatory framework for Angel Funds under the SEBI (Alternative Investment Funds) Regulations, 2012 (AIF Regulations). The move is aimed at rationalising compliance requirements, expanding investor access, and enhancing ease of doing business for Angel Funds operating within the AIF ecosystem.
In the context of the government’s recent abolition of the “Angel Tax”, SEBI re-evaluated the regulation of Angel Funds and, following strong stakeholder feedback, decided to retain them within the AIF framework — while significantly simplifying how they raise and manage capital.
One of the most significant decisions is the requirement that all investors in Angel Funds must now be Accredited Investors (AIs). Unlike the earlier model of manager-led verification, AIs undergo independent eligibility checks and meet updated financial thresholds aligned with today’s market conditions.
To enable wider investor participation while remaining compliant with the Companies Act, the SEBI Board also approved amending the ICDR Regulations to classify AIs as Qualified Institutional Buyers (QIBs) for the limited purpose of investing in Angel Funds.
While AI adoption has been limited so far, SEBI expects this to improve with recent relaxations in documentation requirements and a one-year glide path for full implementation. Existing investments by non-AIs will be grandfathered.
Other key measures include: revised investment limits (₹10 lakh–₹25 crore), removal of the 25% cap on investee company exposure, permission to exceed 200 AIs per deal, and allowing follow-on investments in firms that have matured beyond the start-up stage.
Angel Funds must now offer each deal to all investors, and allocate based on pre-declared terms in their PPM. Fund sponsors or managers will need to maintain a continuing interest of at least 0.5% or ₹50,000 per investment.
These reforms follow public consultations and recommendations from SEBI’s Alternative Investment Policy Advisory Committee. The regulator views this as a first step toward enabling AI-only pools and introducing lighter-touch regulations across the broader AIF landscape.
