Circular Date: September 10, 2025
Reference: SEBI/HO/AFD/AFD-POD-1/P/CIR/2025/128
Circular Source: https://www.sebi.gov.in/legal/circulars/sep-2025/revised-regulatory-framework-for-angel-funds-under-aif-regulations_96553.html
SEBI has issued a new circular introducing a revised regulatory framework for Angel Funds under the SEBI (Alternative Investment Funds) Regulations, 2012. The changes, effective immediately, are aimed at enhancing ease of doing business, ensuring better risk management, and providing operational clarity to Angel Funds.
🔑 Key Highlights of the Circular
1. Fundraising Norms
Angel Funds can raise money only from Accredited Investors.
New Angel Funds (post this circular) must onboard only Accredited Investors.
Existing Angel Funds have until September 8, 2026 to transition.
At least five Accredited Investors must be onboarded before declaring the first close.
2. Investment Framework
Investments must be made directly by Angel Funds; no separate schemes are required.
Follow-on investments permitted, but capped at ₹25 crore per investee company.
Lock-in for investments:
1 year (general rule)
6 months if exit is via third-party sale.
Overseas investments allowed, subject to RBI and SEBI conditions, within the 25% overseas cap (as per AIF Master Circular).
3. Allocation & Investor Rights
Angel Funds must disclose a fixed allocation methodology in their PPM; no case-by-case discretion allowed.
Pro-rata rights in investments and distributions are mandatory, with exceptions for carried interest/additional returns.
4. Other Compliance Obligations
Angel Funds are now a separate Category I AIF (no longer a sub-category under VCFs).
Annual PPM compliance audit mandatory if investments exceed ₹100 crore.
Reporting of performance data to benchmarking agencies is compulsory from FY 2025-26 onwards.
All limits/thresholds will now be calculated on total investments at cost, not corpus.
Investor/investment due diligence thresholds to be applied at investment level.
Compliance Test Report must cover provisions of this circular.
Implications for Angel Funds
Existing Angel Funds must prepare for the transition by September 2026.
Managers must ensure robust systems for investor accreditation, allocation methodology, and compliance reporting.
Greater transparency and benchmarking will bring Angel Funds closer to mainstream institutional standards.