SEBI launches VCF Settlement Scheme 2025 to help legacy Venture Capital Funds settle pending compliance issues and complete migration to the AIF regime.
New Delhi (ABC Live): SEBI has introduced the VCF Settlement Scheme 2025 to help Venture Capital Funds (VCFs) that face challenges in liquidating investments on time. Many VCFs have struggled to wind up schemes within their original tenure. As a result, SEBI created a migration route to the Alternative Investment Funds (AIF) framework. This migration provides an extra one-year window to complete liquidation and winding up.
The scheme is valid from July 21, 2025, to January 19, 2026. VCFs that have migrated and have at least one scheme with an expired tenure but not yet wound up are eligible to apply. Applicants must submit a settlement request and pay a non-refundable fee of ?25,000 plus GST. SEBI also requires additional settlement fees based on the size of unliquidated investments. These fees range from ?1,00,000 for investments up to ?25 crore to ?6,00,000 for those exceeding ?200 crore.
Importantly, all settlement costs must be borne by the Investment Manager or Sponsor. These costs cannot be recovered from the fund, scheme, or investors. This policy ensures investor protection and holds fund managers accountable.
As of December 2024, SEBI data shows that 35% of VCF schemes exceeded their liquidation timelines. These schemes hold approximately ?3,500 crore in unliquidated investments. The VCF Settlement Scheme aims to reduce this non-compliance by an estimated 60%, based on past regulatory trends.
Failure to apply for the scheme by the deadline may invite SEBI enforcement actions. SEBI has signaled strong regulatory intent to ensure timely fund wind-ups and protect investors.
Legal Framework and Investor Protection
SEBI’s authority to regulate VCFs and AIFs comes from the SEBI Act, 1992. The Supreme Court has reinforced this mandate in key judgments such as SEBI v. Sahara India Real Estate Corp Ltd (2012). The VCF Settlement Scheme aligns with the Court’s view that regulatory authorities can provide settlement avenues to encourage compliance. Additionally, prohibiting the recovery of settlement costs from investors follows fiduciary principles upheld in Reliance Industries Limited v. SEBI (2014).
Expert Commentary
Pankaj Gupta, Senior Financial Analyst at ABC Live, said:
“SEBI’s VCF Settlement Scheme 2025 strikes a good balance between firm enforcement and pragmatic flexibility. It offers VCFs a clear path to settle legacy issues while protecting investor interests. This approach strengthens India’s venture capital ecosystem.”
Conclusion
The VCF Settlement Scheme 2025 provides a critical opportunity for VCFs to resolve legacy compliance challenges. Funds should complete their migration to the AIF regime promptly and submit their applications before the deadline. Stakeholders are encouraged to review official SEBI communications and prepare accordingly.
For more details, visit SEBI’s official VCF Settlement Scheme 2025 page.
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