The Securities and Exchange Board of India (SEBI) on Tuesday proposed the Venture Capital Fund (VCF) Settlement Scheme 2025, offering a limited window for legacy venture capital funds to regularise compliance where they have failed to wind up expired schemes despite migrating to the Alternative Investment Fund (AIF) regime.
The scheme targets VCFs that were registered under the now-repealed SEBI (Venture Capital Funds) Regulations, 1996, and have at least one scheme whose tenure has expired but remains unwound, while still holding unliquidated investments. These entities must have already migrated to the AIF framework, as stipulated under SEBI’s circular dated August 19, 2024.
Following the introduction of the AIF Regulations in 2012, VCFs were allowed to continue under the old regulations only until their schemes were fully wound up. However, many funds were unable to exit their investments within the fund’s life cycle, leaving schemes in regulatory limbo and prompting repeated representations to the regulator.
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In response, SEBI had allowed such VCFs to migrate to the AIF regime, granting them an additional one-year window to liquidate assets.
To resolve pending compliance issues, SEBI has now rolled out a structured settlement mechanism. The VCF Settlement Scheme 2025 will be open from July 21, 2025, to January 19, 2026. Funds that qualify must file a formal settlement application and pay a non-refundable application fee of Rs 25,000 with applicable 18 per cent GST.
The move reflects SEBI’s intent to close legacy regulatory gaps while providing a one-time compliance route to older funds caught in transition. The scheme is expected to provide clarity to investors and allow funds to formally exit their obligations under a structured process.
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The base settlement amount is pegged at Rs 1 lakh for a delay of up to one year in winding up a scheme, with an additional Rs 50,000 for every subsequent year or part thereof. Importantly, the costs related to the settlement, including the application fee and settlement amount, must be borne by the investment manager or sponsor.
SEBI has also made it clear that entities failing to either complete migration by July 19, 2025, or avail of the settlement scheme thereafter may face regulatory action. A dedicated payment gateway and the application format will be made available on SEBI’s website, the regulator said.
