Regulatory Body SEBI reveals settlement plan for older venture capital funds that transferred to the Alternative Investment Fund (AIF) framework
The Securities and Exchange Board of India (SEBI) has announced a new scheme aimed at helping legacy Venture Capital Funds (VCFs) that have migrated to the Alternative Investment Funds (AIF) regime resolve pending compliance issues. The VCF Settlement Scheme 2025, introduced on Tuesday, is open from July 21, 2025, to January 19, 2026, and is designed to facilitate the winding up of VCF schemes that have exceeded their liquidation timelines but still hold unliquidated investments.
The scheme is available to VCFs that have migrated to the AIF framework and have at least one scheme with an expired tenure but not yet wound up. To apply, VCFs must submit a formal settlement application and pay a non-refundable fee of ₹25,000 plus GST. The fee increases based on the size of unliquidated investments, ranging from ₹1,00,000 for investments up to ₹25 crore to ₹6,00,000 for those exceeding ₹200 crore.
All settlement costs must be borne by the investment manager or sponsor and cannot be recovered from the fund, scheme, or investors. The objective of the scheme is to reduce non-compliance by an estimated 60%, based on past regulatory trends, by providing a structured mechanism for legacy VCFs to complete their winding-up process.
The scheme does not apply to funds that have already wound up their investment vehicles. It is designed to provide a solution for funds that have not been able to wind up their investment vehicles despite the expiry of their liquidation periods. The scheme allows these funds to settle regulatory actions related to failure to wind up their investment vehicles or holding unliquidated investments.
The scheme allows legacy VC funds to avert regulatory penalties for failing to wind up their investment vehicles or for holding unliquidated investments. For delay of up to one year in winding up a VCF fund, the base amount for settlement is Rs 1 lakh. For every subsequent year of delay or part thereof, an additional Rs 50,000 is required.
The application format for the scheme will be available on SEBI's website. The scheme is for those funds which have opted to migrate and have completed the process. SEBI had repealed the VCF regulations in 2012 following the introduction of AIF Regulations. Despite allowing VCFs to migrate to the AIF regime, many legacy funds faced challenges in liquidating investments within their original tenures, leading to regulatory issues. This scheme addresses these challenges by providing a final opportunity for VCFs to regularize their compliance and complete the winding-up process.
Businesses looking to resolve pending compliance issues with their legacy Venture Capital Funds (VCFs) that have migrated to the Alternative Investment Funds (AIF) regime can now invest in the VCF Settlement Scheme 2025. Eligible VCFs must submit a formal settlement application and pay a non-refundable fee based on the size of unliquidated investments, ranging from INR 1 lakh for a delay up to one year, to INR 6,00,000 for those exceeding INR 200 crore. This finance-driven initiative aims to reduce non-compliance by an estimated 60% and provides a solution for funds that have not been able to wind up their investment vehicles despite the expiry of their liquidation periods.
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