The Securities and Exchange Board of India (SEBI) on September 10, 2025, issued a revised regulatory framework for Angel Funds under AIF Regulations. It has amended the Alternative Investment Funds (AIF) Regulations, 2012, on September 9, 2025, to streamline operations, improve ease of doing business, and strengthen risk management for Angel Funds.
The following has been stated:
• Angel Funds can raise money only from Accredited Investors. Newly registered Angel Funds must on-board only Accredited Investors, while existing funds are permitted a transition period until September 8, 2026, during which they may have up to 200 non-accredited investors, but no fresh investments will be allowed from them thereafter. All Angel Funds are required to on-board at least five Accredited Investors before declaring their first close, which must be done within 12 months of SEBI’s approval of the Private Placement Memorandum (PPM).
• With respect to investments, Angel Funds must now make investments directly without launching schemes. Follow-on investments are allowed in portfolio companies, even if they are no longer start-ups, provided the fund’s shareholding does not exceed the pre-issue percentage, the total investment per company remains within ₹25 crores, and participation is limited to the original investors on a pro-rata basis. Investment lock-in has been set at one year, though it is reduced to six months if the exit is through a third-party sale. Overseas investments remain permissible under RBI and SEBI guidelines, with the 25% cap calculated on the basis of total investments held by the fund.
• For offering and allocation, Angel Funds must disclose a defined methodology in their PPM for allocating investment opportunities among consenting investors. This methodology must be strictly adhered to, leaving no room for case-specific discretion. Investors will continue to hold pro-rata rights in proceeds distribution, except where carried interest or additional return arrangements with managers or sponsors apply.
This revised regulatory framework for Angel Funds takes effect immediately from September 9, 2025.
Please refer to the document attached below for more details.
[SEBI/HO/AFD/AFD-POD-1/P/CIR/2025/128]
