Key Takeaways
- • SEBI resolved enforcement proceedings against 29 venture capital funds through the Venture Capital Fund Settlement Scheme, 2025, with funds collectively paying ₹2 crore in settlement charges ranging from ₹2 lakh to ₹9 lakh per fund.
- • The violations centered on delayed liquidation of investments beyond the prescribed timeframe under fund scheme requirements; affected funds included those backed by Gaja Capital, SBI Macquarie, ASK Real Estate, SIDBI SME Venture Capital, Kotak India Venture, and LIC Housing Finance Limited.
- • Compliance issues stemmed from the 2012 regulatory transition when SEBI replaced the Venture Capital Funds Regulations, 1996 with the Alternative Investment Funds (AIF) Regulations, 2012, creating ambiguity for legacy venture capital funds operating under older frameworks.
- • The settlement scheme provided an expedited resolution pathway for funds that continued holding investments after their permitted liquidation periods expired, addressing a systemic issue among legacy VCFs registered under discontinued regulatory structures.
Summary
The Securities and Exchange Board of India (SEBI) has concluded enforcement proceedings with 29 venture capital funds (VCFs) that violated liquidation requirements under their respective fund schemes. The resolution occurred through the Venture Capital Fund Settlement Scheme, 2025, a regulatory mechanism designed to address compliance gaps affecting legacy venture capital funds operating under outdated regulatory frameworks. The 29 funds collectively paid approximately ₹2 crore in settlement charges to close the proceedings, with individual payments ranging from ₹2 lakh to ₹9 lakh depending on the severity of each violation.
The core violation involved funds failing to liquidate investments and wind down operations within prescribed timeframes. Under the Venture Capital Funds Regulations, 1996, schemes were obligated to liquidate portfolios and cease operations by defined expiration dates. SEBI's enforcement action identified numerous funds that retained investments beyond permitted periods, creating non-compliance with applicable regulatory provisions. Prominent fund sponsors that opted for settlement included Gaja Capital, SBI Macquarie, ASK Real Estate, SIDBI SME Venture Capital, Kotak India Venture, and LIC Housing Finance Limited, among others.
The widespread compliance issues traced back to regulatory transition in 2012, when SEBI superseded the 1996 Venture Capital Funds Regulations with the Alternative Investment Funds (AIF) Regulations, 2012. Many legacy VCFs registered under the older framework faced ambiguity regarding their obligations under the new regulatory regime, leading to prolonged investment holding periods. By establishing the 2025 Settlement Scheme, SEBI provided affected funds a structured pathway to resolve historical violations without protracted litigation, balancing regulatory enforcement with practical resolution for fund managers operating during a period of significant regulatory change.
The core violation involved funds failing to liquidate investments and wind down operations within prescribed timeframes. Under the Venture Capital Funds Regulations, 1996, schemes were obligated to liquidate portfolios and cease operations by defined expiration dates. SEBI's enforcement action identified numerous funds that retained investments beyond permitted periods, creating non-compliance with applicable regulatory provisions. Prominent fund sponsors that opted for settlement included Gaja Capital, SBI Macquarie, ASK Real Estate, SIDBI SME Venture Capital, Kotak India Venture, and LIC Housing Finance Limited, among others.
The widespread compliance issues traced back to regulatory transition in 2012, when SEBI superseded the 1996 Venture Capital Funds Regulations with the Alternative Investment Funds (AIF) Regulations, 2012. Many legacy VCFs registered under the older framework faced ambiguity regarding their obligations under the new regulatory regime, leading to prolonged investment holding periods. By establishing the 2025 Settlement Scheme, SEBI provided affected funds a structured pathway to resolve historical violations without protracted litigation, balancing regulatory enforcement with practical resolution for fund managers operating during a period of significant regulatory change.
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