Securities and Exchange Board of India
project apprised and funded by Bank/Financial Institution should also be extended to project financed by the registered venture capital funds. The revised IPO criteria would be either companies having three years track record of profitability or the project is funded to the extent of 10% by Banks, Financial Institutions or registered venture capital fund. The participation of the venture capital fund to the extent of 10% of the project cost however should be locked in for a period of one year. Those companies which are funded by Venture capitalists and their securities are listed on the stock exchanges outside the country, these companies should be permitted to list their shares on the Indian stock exchanges.
7.3.4The VCF enter into an agreement with the VCU at the time of commitment for participation in the venture which inter alia includes an option to the VCF to buy or sell the securities from / to the promoters. The legality of such an agreement is not clear in the light of Circular issued by Government of India 1969 under Section 16 of SC(R)A when the share of the VCU are listed on the stock exchange. Further, in the event of shares being listed on the stock exchange, the exercising of the right by VCF may trigger off SEBI Takeover Code. The necessary exemptions may be granted to VCF to enable them to exercise their contractual rights within the framework of law.
7.3.5The trading in unlisted securities are not held in an organised manner in India. The transaction in unlisted securities are primarily bi-lateral contracts among the buyer and seller. SEBI has permitted OTCEI to develop a platform where it will facilitate trading in unlisted equities between qualified investors. This would help in arriving at the prices of unlisted securities as per the market forces. The VCF and FVCI registered with SEBI should be considered eligible for qualified investor and at the same time the joint promoters of the ventures should also be eligible to be qualified investors.
7.3.6If FVCI disinvest and transfer its holding in VCU in favour of any other person, it is required by RBI to obtain a NOC from the joint venture partner and other shareholders. The process of obtaining NOC is time consuming and cause uncertainty about the transaction for a FVCI as joint venture partners may create obstacle in the exit route for VCFs. The requirement for obtaining NOC should be dispensed with.
In view of the above background, the following recommendations are proposed:
Relaxing buyback requirements : The provisions under the Companies Act for buyback of securities needs to be amended as under :
Report of K B Chandrasekhar Committee on Venture Capital33