SEBI, vide its Circular dated September 10, 2025, has introduced a revised regulatory framework for Angel Funds under the AIF Regulations, effective immediately, aimed at enhancing ease of doing business, risk reduction, and operational clarity. Key changes include mandatory fund-raising only from Accredited Investors, declaration of first close within 12 months, direct investments at fund level without launching schemes, conditions for follow-on investments (capped at ₹25 crore per company with lock-in norms), overseas investment limits aligned with AIF norms, and mandatory pro-rata rights in investments and distributions. Angel Funds will now be recognized as a separate Category I AIF (instead of a sub-category of Venture Capital Funds) and will be subject to annual PPM audits (if investments exceed ₹100 crore) and reporting to benchmarking agencies from FY 2025-26. All limits and compliance thresholds will be based on total investments at cost, and compliance with this circular must be included in the AIF Compliance Test Report.
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