SEBI Regulations governing overseas Venture Funds setting thier establishments in India for doing Venture Capital Business are covered by the above Regulations.

Designated Bank: means any bank in India which has been permitted by the Reserve Bank of India to act as banker to the Foreign Venture Capital Investor.

Domestic Custodian: means a person registered under the Securities and Exchange Board of India (Custodian of Securities) Regulations, 1996.

Equity Linked Instruments: includes instruments convertible into equity share or share warrants, preference shares, debentures compulsorily or optionally convertible into equity.

Foreign Venture Capital Investor: means an investor incorporated, established outside India, is registered under these Regulations and proposes to make investment in accordance with these Regulations

Investible Funds: means the fund committed for investments in India net of expenditure for administration and management of the fund.

Venture Capital Fund: means a Fund established in the form of a Trust, a company including a body corporate and registered under Securities and Exchange Board of India (Venture Capital Fund) Regulations, 1996, which

1. has a dedicated pool of capital;

2. raised in the manner specified under the Regulations; and

3. invests in venture capital undertaking in accordance with the Regulations.

venture Capital Undertaking: means a domestic company:-

1. whose shares are not listed in a recognised stock exchange in India;

2. which is engaged in the business of providing services, production or manufacture of articles or things, but does not include such activities or sectors which are specified in the negative list by the Board, with approval of Central Government, by notification in the Official Gazette in this behalf."

For the purposes of seeking registration under these regulations, the applicant must make an application to the Board in Form A along with the prescribed application fee (as specified in Part A of the Second Schedule to be paid in the manner specified in Part B thereof).

For the purpose of the grant of a certificate to an applicant as a Foreign Venture Capital Investor, the Board shall consider the following conditions for eligibility, namely: -

1. the applicants track record, professional competence, financial soundness, experience, general reputation of fairness and integrity.

2. Whether the applicant has been granted necessary approval by the Reserve Bank of India for making investments in India;

3. whether the applicant is an investment company, investment trust, investment partnership, pension fund, mutual fund, endowment fund, university fund, charitable institution or any other entity incorporated outside India; or

4. whether the applicant is an asset management company, investment manager or investment management company or any other investment vehicle incorporated outside India;

5. whether the applicant is authorised to invest in venture capital fund or carry on activity as a 5*[foreign venture capital investors];

6. whether the applicant is regulated by an appropriate foreign regulatory authority or is an income tax payer; or submits a certificate from its banker of its or its promoter's track record where the applicant is neither a regulated entity nor an income tax payer.

7. the applicant has not been refused a certificate by the Board.

8. whether the applicant is a fit and proper person.

1. If the Board is satisfied that the applicant is eligible for the grant of certificate, it shall send an intimation to the applicant.

2. On receipt of intimation, the applicant shall pay to the Board, the registration fee specified in Part A of the Second Schedule in the manner specified in Part B thereof.

3. The Board shall on receipt of the registration fee grant a certificate of registration in Form B.

The certificate granted to the foreign venture capital investor shall be inter-alia, subject to the following conditions, namely:-

1. it shall abide by the provisions of the Act, and these regulations;

2. it shall appoint a domestic custodian for purpose of custody of securities;

3. it shall enter into arrangement with a designated bank for the purpose of operating a special non-resident rupee or foreign currency account.

4. it shall forthwith inform the Board in writing if any information or particulars previously submitted to the Board are found to be false or misleading in any material particular or if there is any change in the information already submitted.

All investments to be made by a foreign venture capital investors shall be subject to the following conditions:

1. it shall disclose to the Board its investment strategy.

2. it can invest its total funds committed in one venture capital fund

it shall make investments in the Venture Capital Undertaking as enumerated below:

1. at least 66.67% of the investible funds shall be invested in unlisted equity shares or equity linked instruments of Venture Capital Undertaking.

2. not more than 33.33% of the investible funds may be invested by way of:

   1. subscription to initial public offer of a venture capital undertaking whose shares are proposed to be listed subject to lock-in period of one year;

   2. debt or debt instrument of a venture capital undertaking in which the foreign venture capital investor has already made an investment by way of equity.

   3. preferential allotment of equity shares of a listed company subject to lock in period of one year.

   4. the equity shares or equity linked instruments of a financially weak company or a sick industrial company whose shares are listed.

   Explanation 1: - For the purpose of these regulations, a "financially weak company" means a company, which has at the end of the previous financial year accumulated losses, which has resulted in erosion of more than 50% but less than 100% of its networth as at the beginning of the previous financial year."

   5. Special Purpose Vehicles which are created for the purpose of facilitating or promoting investment in accordance with these Regulations.

      Explanation - The investment conditions and restrictions stipulated in clause (c) of regulation 11 shall be achieved by the Foreign Venture Capital Investor by the end of its life cycle."