RBI relaxes Foreign Venture Capital Investor (FVCI) norms for Startup investment
One more announcement to the stay-in-India check list has come from RBI with respect to registered under SEBI (FVCI) Regulations, 2000.
RBI has announced amendments to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, notified vide Notification No. FEMA 20/2000-RB dated May 3, 2000, as amended from time to time (Principal Regulations).
Sanjay Khan Nagra, iSPIRT volunteer talks about this announcement in the video embedded. Below. Also the main provisions and text is described in this blog below. Those interested in the original regulation may visit this page here.
As per the amendment notification referred to above, any FVCI which has obtained registration under the Securities and Exchange Board of India (FVCI) Regulations, 2000, will not require any approval from Reserve Bank of India and can invest in:
1. Equity or equity linked instrument or debt instrument issued by an Indian company whose shares are not listed on a recognised stock exchange at the time of issue of the said securities/instruments and engaged in any of the following sectors:
(ii) IT related to hardware and software development
(iv) Seed research and development
(v) Research and development of new chemical entities in pharmaceutical sector
(vi) Dairy industry
(vii) Poultry industry
(viii) Production of bio-fuels
(ix) Hotel-cum-convention centres with seating capacity of more than three thousand
(x) Infrastructure sector (This will include activities included within the scope of the definition of infrastructure under the External Commercial Borrowing guidelines / policies notified under the extant FEMA Regulations as amended from time to time).
2. Equity or equity linked instrument or debt instrument issued by an Indian ‘startup’ irrespective of the sector in which the startup is engaged. A startup will mean an entity (private limited company or a registered partnership firm or a limited liability partnership) incorporated or registered in India not prior to five years, with an annual turnover not exceeding INR 25 Crores in any preceding financial year, working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property and satisfying certain conditions given in the Regulations.
3. Units of a Venture Capital Fund (VCF) or of a Category I Alternative Investment Fund (Cat-I AIF) (registered under the SEBI (AIF) Regulations, 2012) or units of a Scheme or of a fund set up by a VCF or by a Cat-I AIF.
iSPIRT believes these announcements have made Govt. Recognize the importance of opening up investment to promote innovative startups. Right now these announcements are limited to Startups recognized by DIPP. However, we hope in future they may be opened for all startups and an easy investment regime in Indian from foreign funding source.