SEBI Launches Settlement Scheme for Expired VCFs: Starting from July 21

The capital market regulator, the Securities and Exchange Board of India (SEBI) has announced a new settlement scheme aimed at venture capital funds (VCFs) that have exceeded their liquidation periods but are yet to be wound up.

The VCF Settlement Scheme, 2025, initiative will be open for applications from July 21, 2025, and remain valid until January 19, 2026. This move follows approval at SEBI’s quarterly board meeting held in June 2025.

Purpose of the Scheme

According to SEBI’s public notice, the scheme is designed to allow VCFs an opportunity to resolve regulatory action related to schemes whose liquidation timelines have lapsed but still hold unliquidated investments, provided they have completed migration to the AIF framework.

Background: Transition from VCF to AIF Regime

SEBI had repealed VCF regulations in May 2012 following the introduction of the Alternative Investment Fund (AIF) Regulations. Despite this, several VCFs faced challenges in liquidating all their investments within the mandated tenure.

To address these concerns, the AIF regulations facilitated a migration path for such legacy VCFs. However, many of these funds still hold investments and remain technically active, creating compliance issues.

Settlement Application Details

Entities opting for the settlement scheme must:

• Submit a formal application
• Pay a non-refundable fee of ₹25,000 plus 18% GST

Financial Implications of Settlement

The settlement cost is structured as follows:

• A base amount of ₹1,00,000 for delays up to one year
• An additional ₹50,000 for every subsequent year or part thereof
• An additional amount between ₹1 lakh and ₹6 lakh, depending on the value of unliquidated investments

Note: The settlement costs must be borne solely by the investment manager or sponsor. These expenses cannot be passed on to the fund, scheme, or investors.

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SEBI has granted VCFs an extended period of one year to fully liquidate their investments and formally wind-up operations. Upon migrating to the AIF regime and obtaining investor consent, VCFs may also enter a formal dissolution period, offering more structured closure procedures.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

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