Sebi announces settlement scheme for Venture Capital Funds

The VCF Settlement Scheme 2025 has now been proposed to provide an opportunity to such VCFs to settle actions arising out of having schemes with liquidation periods expired, but not wound up, with unliquidated investments even after the migration.

Venture Capital Funds will now have an option to settle the violation matters with market regulator Securities and Exchange Board of India (Sebi), after the regulator announced a VCF Settlement Scheme 2025, on July 15.

Moneycontrol had reported on June 4 that Sebi is coming up with such a scheme for settlement, and the proposal was cleared by Sebi during its June 18 board meeting.

The regulator had repealed the erstwhile VCF regulation after notification of AIF rules in May 2012, but some VCFs were unable to liquidate their investments during the tenure and continue to hold them beyond the expiry of the tenure. Considering the requests received from VCFs regarding difficulties in fully liquidating their investments during the tenure of the schemes, a migration period was fixed with an additional time period given till July 19, 2025.

The VCF Settlement Scheme 2025 has now been proposed to provide an opportunity to such VCFs to settle actions arising out of having schemes with liquidation periods expired, but not wound up, with unliquidated investments even after the migration.

VCFs with at least one scheme whose tenure has expired but not wound up and has completed the migration, will be eligible for settlement. The scheme will commence on July 21, 2025 and end on January 19, 2026. Any entity desirous of making an application for availing settlement under the VCF Settlement Scheme, 2025 shall be advised to submit a Settlement application along with a non-refundable application fee of Rs 25,000/- with GST @ 18%.

The Base Amount for settlement for delays up to one year in winding up the scheme shall be Rs 1 lakh. For every subsequent year of delay or part thereof, an additional amount of Rs 50,000 will be payable. Additionally, a slab-wise amount will be required to pay based on the amount of unliquidated investment corpus, which will be minimum Rs 1 lakh and maximum amount of Rs 6 lakh. The settlement amount and all expenses related to settlement will be borne by the Investment Manager or Sponsor and will not be recoverable from the scheme or investors.

Sebi will issue Frequently Asked Questions on the Settlement Scheme will be available on its website on July 21, 2025.