An Overview of Venture Capital Company Registration A venture capital company is a company registered under the provisions of the SEBI (Venture Capital Funds) Regulations of 1996. Venture capitalist companies provide financial support to small, emerging, early-stage, and startup firms. These companies take risks in finance to generate an outcome that is successful enough for the growing startups. Any entity striving to operate as a venture capital fund in India must obtain a venture capital company registration certificate from SEBI. VC companies generally focus on the specific sectors that are running successfully and which have acquired the marketplace. Therefore, they selectively invest based on innovative technological developments and business model strategies. VC company setup is a strategic move that builds a firm's credibility in the market, protects investors and improves access to potential investment opportunities. A registered VC firm is seen as a credible entity in the investment community. What is a Venture Capital? Venture Capital is a category of Alternative investment fund that is registered as a trust, company, or body corporate under the provisions of the SEBI (Venture Capital Funds) Regulations of 1996. Simply, it is categorized as private equity capital or a pooled investment strategy primarily used for funding startup businesses and obtaining significant returns. Advantages of Venture Capital Company Registration There are various advantages to registering a venture capital fund in India. Consider the following advantages enjoyed by the applicants applying for the VC business registration: 1. High Profitability The new and innovative projects financed through smart money help achieve high profitability in the long run. The main motive of investment in a growing business is to earn higher profits by taking risks. 2. Business Expertise Venture capital provides financial backing to startups, which assists in efficiently exploring and implementing business decisions and making financial management and human resource management function more expediently. Making better decisions in these key areas helps vitally for the growth of business. 3. Supplemental Resources The VC assists in providing support at the company's growth stage, especially in areas like legal, tax, and personnel matters. The young company thus strives for faster growth and greater success. 4. No Liability of Shareholders The shareholders and venture entrepreneurs have no liability to pay back the money invested as the business model is not responsible for repayment in case it fails. Market Size of Venture Capital Funding India holds the record of having 1.76K VC funds with a combined portfolio of 16.4K companies. The global market size of VC investment and funding is recorded at US $284.8 billion in 2023. The global market size is expected to boom at a CAGR of 17.9% i.e., total growth of US $1310.8 billion between the financial year of 2024 to 2032. Revenue Streams for Venture Capital Companies VC firms that use a very different business model usually have two sources of making money. Given below are the revenue streams for venture capital companies in India- Management Fees Carried Interest Advisory Fees Co-investment Eligibility for Venture Capital Company Registration The venture capital applicants applying for registration must meet the eligibility criteria as prescribed under Regulation 4 of the SEBI (Venture Capital Funds) Regulations of 1996. The following is the list of eligibility criteria for the directors, principal officers, and employees of the applicant-company, trust, or body corporate: Must not be involved in any litigation concerned with securities market; Must not be involved in any litigation with an adverse effect on the applicants’ business; Must not be convicted of any offence (including moral turpitude or economic offence); Must be a fit and proper person; Must have at least 5 years of experience in advising and managing pools of capital, assets, and portfolio management (for key personnel). We hope you have understood the eligibility criteria for VC firm incorporation in India. To get expert assistance, connect with our fintech business consulting professionals. Documents Needed for Venture Capital Company Registration The list of documents needed for venture capital company registration varies depending upon the authority that applies. Generally, the documents required for the application filed by a company, trust, or any other body corporate are: MOA & AOA of the company Company Incorporation Certificate Agreement (stating investors and voting rights) Term Loan and Cash Credit Account Statement Investment Management Agreement (if any) Information on Unsecured Loan Bank Guarantee & Collateral Protection (if the applicant is a corporate agency) Registered Trust Deed Partnership Deed (if the applicant is an LLP) Registration Process for Venture Capital Company The registration of a venture capital company is mandatory under the Companies Act of 2013. The procedure as specified under SEBI venture capital Regulations must be followed for the registration of VC companies in India. 1. Filing Form A The applicants must apply to Form A along with the necessary documents for the successful registration of a venture capital company under the SEBI (Venture Capital Funds) Regulations of 1996. 2. Submission of Necessary Documents & Information Along with the application form and other documents, the information (including investment manager & advisor, Asset management company activities, the profile of the directors, shareholding pattern, key personnel/management team, and any other such details) is required to be submitted to SEBI. 3. Disclosure of Investment Strategy Next, the applicants must mandatorily make proper disclosure of the investment strategy specifying the investment style, pattern, proposed corpus, class of investors’ life cycle of the fund, and other relevant information. 4. Submission of Applicants Declaration The applicants must make some particular declarations in respect of fit and proper person, undertaking under Regulation 11(3), and the 3rd Schedule of SEBI (Venture Capital Funds) Regulations of 1996. 5. SEBI Clarification for Application Filed The Securities and Exchange Board of India may furnish any sort of clarification as it deems fit for the consideration of the application filed. 6. Payment of Non-Refundable Application Fees On receipt of the application the board evaluates the documents and after being satisfied, intimates the applicants for the payment of non-refundable application fees as specified. 7. Grant of Certificate of Registration The board shall grant the certificate of registration (in Form B) for the venture capital company upon receipt of the application fees. Wondering how to streamline the VC business registration process? Well, our venture consultancy services ensure an easy and hassle-free process. Post-Registration Compliances for Venture Capital Company The venture capital companies must comply with the post-registration compliances as stated in the SEBI (Venture Capital Funds) Regulations of 1996. The following are the post-registration requirements that must be complied with by the VC firms. 1. Issuance of Placement Memorandum The venture capital companies must issue a placement memorandum containing the conditions concerning which the monies are proposed to be raised from investors. 2. Enter into Subscription Agreement Further, the SBEI-registered venture capital companies must enter into a contribution or subscription agreement with the investors. Also, the VC firms must file the necessary information (concerning the placement memorandum and subscription agreement issued) with SEBI. 3. Maintenance of Books & Records Every registered venture capital must maintain its books of accounts and necessary records for at least 8 years. Further, the venture investors must also inform the board regarding the place where the books, records, and documents are maintained. Our venture consultancy services will help you meet your post-registration compliance needs without any room for stress. Penalty for Non-Compliance with Regulations The penalty as prescribed under Chapter V of the SEBI (Intermediaries) Regulation of 2008 is applied for any non-compliance with the provisions stated in the SEBI (Venture Capital Funds) Regulations of 1996. Venture Capital Registration Fees The applicants must mandatorily pay a venture capital registration fees of Rs. 500,000/- and an application fee of Rs.100,000/- as prescribed under Schedule 2nd of the SEBI (Venture Capital Funds) Regulations of 1996. Timeline Required for VC Company Setup Generally, the timeline required for the VC company setup depends upon compliance with the registration requirement as specified by SEBI. However, SEBI grants the certificate of registration within 21 working days from the date of receipt of the application. Why Choose Enterslice for Venture Capital Company Registration? We at Enterslice provide more efficient, cost-saving, and transparent services for successful venture capital company registration in consonance with the SEBI regulations. We help businesses follow the SEBI guidelines for VC entity registration. Given below are the reasons why we are the most trusted investment consulting partner for building tech-friendly VC firms in India: 1. Venture Consultancy Services We provide venture consultancy services by determining the sustainability of investment and understanding the capital market to simplify the process of VC entity registration in India. 2. Economical and Fast We provide comparatively economical and fast services for the registration of venture capital companies under SEBI regulations. 3. Provides Business Model We provide a well-developed business model for the proper evaluation of the company’s finances. 4. Proficient Management Team We provide an impressive and proficient management team to secure the potential for rapid growth and development of VC firms. 5. Advisory Services We also advise the applicants for the preparation and filing of application form A along with the other relevant documents. 6. 15+ Years of Expertise With over a decade of experience in the VC regulatory space, we understand the challenges and know very well how to overcome them. 7. 300+ VC Firms Registered We have successfully processed 300+ venture capital company registrations with a dedicated network of 1000+ fintech professionals. 8. Faster Turnaround Time Get your VC company formation done in the desired time significantly faster than your competitors.
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