SEBI Concludes Proceedings Against 29 Venture Capital Funds Over Norms Violation

The Securities and Exchange Board of India (SEBI) has settled enforcement proceedings with 29 venture capital funds (VCFs) for failing to liquidate investments within the permitted timeframe of their schemes, as per recent reports. 

The settlements were carried out under the Venture Capital Fund Settlement Scheme, 2025. The scheme was introduced to resolve compliance issues linked to older VCFs registered under earlier regulations. 

As part of the settlement process, the funds paid specified charges to close the proceedings. 

Settlement Amounts Paid 

According to SEBI’s order, the 29 funds together paid nearly ₹2 crore towards settlement charges. Individual payments ranged between ₹2 lakh and ₹9 lakh depending on the case. 

Among the funds covered by the order were those associated with Gaja Capital, SBI Macquarie, ASK Real Estate, SIDBI SME Venture and Kotak India Venture. LICHFL Fund was also among the applicants that opted to settle the proceedings. 

Nature of the Violations 

The proceedings related to VCF schemes that continued to remain active even after the expiry of their tenure and liquidation period. 

Under the Venture Capital Funds Regulations, 1996, schemes were required to liquidate investments and wind up operations within the specified time. 

SEBI noted that certain schemes continued to hold investments beyond this period, which amounted to non-compliance with Regulation 23(1) read with Regulation 17(1) of the 1996 regulations. 

Regulatory Changes and Legacy Funds 

The compliance issues emerged following regulatory changes introduced in 2012. That year, SEBI replaced the Venture Capital Funds Regulations, 1996 with the Alternative Investment Funds (AIF) Regulations, 2012. 

Existing VCFs were allowed to continue under the earlier framework until their schemes were wound up. However, some funds retained unliquidated investments even after their permitted liquidation period had ended. 

In 2024, SEBI amended the AIF framework to allow such funds to migrate to the AIF regime and provided mechanisms to address unliquidated assets. 

Closure of Proceedings 

Following a public notice issued on 15 July 2025, eligible funds were allowed to submit settlement applications under the scheme. 

SEBI said the 29 VCFs applied for settlement and paid the prescribed amounts. 

In its order, the regulator stated that the proceedings relating to the identified violations stand settled and no enforcement action will be initiated against the applicants in connection with these defaults. 

Read More: SEBI Introduced Debit Freeze Facility for Mutual Funds Investors: What You Need to Know! 

Conclusion  

With the settlement amounts paid, SEBI said the proceedings related to the identified violations stand resolved. The regulator added that no further enforcement action will be initiated against the applicants for these cases. 

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