Securities and Exchange Board of India (SEBI) has concluded enforcement proceedings against 29 venture capital funds (VCFs) after they opted for settlement under a special regulatory scheme. The action relates to delays in liquidating investments within the prescribed timeframe of their respective fund schemes.
The cases were resolved through the Venture Capital Fund Settlement Scheme, 2025, introduced by SEBI to address compliance issues involving legacy venture capital funds that were registered under older regulatory frameworks.
Settlement Charges Paid by Funds
As part of the settlement process, the 29 funds collectively paid around ₹2 crore in settlement charges to close the proceedings. The individual payments ranged from ₹2 lakh to ₹9 lakh, depending on the extent of the violation in each case.
Funds associated with organisations such as Gaja Capital, SBI Macquarie, ASK Real Estate, SIDBI SME Venture Capital, Kotak India Venture and LIC Housing Finance Limited were among those that opted to settle the matter.
Reason for the Regulatory Action
The proceedings were related to venture capital fund schemes that remained active beyond the expiry of their tenure and liquidation period.
Under the Venture Capital Funds Regulations, 1996, schemes were required to liquidate their investments and wind up operations within a defined timeframe. SEBI found that certain funds continued to hold investments even after the permitted period had ended, resulting in non-compliance with the relevant regulatory provisions.
Impact of Regulatory Transition
Many of the compliance issues emerged following regulatory changes introduced in 2012, when SEBI replaced the Venture Capital Funds Regulations, 1996 with the Alternative Investment Funds (AIF) Regulations, 2012.
While existing VCFs were allowed to continue operating under the earlier framework until their schemes were fully wound up, some funds were left with unliquidated assets after the deadline.
In 2024, SEBI introduced amendments to the AIF framework that allowed such legacy funds to transition into the AIF regime and provided mechanisms to manage remaining investments.
Settlement Scheme and Case Closure
After issuing a public notice on July 15, 2025, SEBI invited eligible venture capital funds to apply for settlement under the special scheme.
The 29 funds submitted settlement applications and paid the required charges. Following this process, SEBI confirmed that the proceedings related to the identified violations have been settled and that no further enforcement action will be taken against the applicants in connection with these cases.
Summary:
SEBI has settled enforcement proceedings with 29 venture capital funds that failed to liquidate investments within the permitted timeframe. Under the Venture Capital Fund Settlement Scheme, 2025, the funds collectively paid around ₹2 crore in settlement charges, allowing the regulator to close the cases without further action.
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