10 September 2025
SEBI's Angel Fund overhaul: accredited investors only, no schemes, a one-year lock-in and a ₹25 crore cap per investee
What is the revised regulatory framework for Angel Funds?
A circular of 10 September 2025, following amendments notified on 9 September 2025. Angel Funds may raise funds only from accredited investors, must on-board at least five before first close, invest directly in investee companies rather than through schemes, lock each investment in for a year, and may not exceed ₹25 crore total in any one investee company.
What changed
SEBI issued circular SEBI/HO/AFD/AFD-POD-1/P/CIR/2025/128 on 10 September 2025, addressed to all Alternative Investment Funds. It follows amendments to the AIF Regulations notified the previous day, 9 September 2025, and specifies the conditions and modalities those amendments left to be specified.
SEBI's stated objectives: ease of doing business, risk reduction, and operational clarity.
Fund raising
Under regulation 19D(1), Angel Funds raise funds only from accredited investors. The circular sets the transition:
| Fund | Obligation |
|---|---|
| Registered after 10 September 2025 | On-board and offer opportunities to accredited investors only |
| Registered on or before that date | Comply by 8 September 2026; no more than 200 non-accredited investors in the interim; no contribution from non-accredited investors after that date |
| Existing investors | Continue to hold investments already made, per the PPM and fund documents |
The manager must check accreditation at the point of accepting contribution — either a valid accreditation certificate, or deemed accredited status under regulation 2(1)(ab).
At least five accredited investors must be on-boarded before first close, which must be declared within 12 months of SEBI's communication taking the PPM on record. Existing Angel Funds that had not declared first close had until 8 September 2026. Miss it and the PPM must be refiled, with the fee paid again.
Investing
The structural change is that Angel Funds no longer launch schemes. Investments are made directly in investee companies, and regulations written for a scheme now apply at fund level. Filing a term sheet with SEBI is discontinued, but records of term sheets must be kept, including who participated in each investment and what they contributed.
Follow-on investment in a company that is no longer a start-up is permitted, with three limits: post-issue shareholding may not exceed pre-issue shareholding; total investment in one investee company may not exceed ₹25 crore; and contribution may come only from the investors in the existing investment, pro-rata, with any declined portion offered to the rest.
Every investment is locked in for one year, or six months where the exit is a sale to a genuine third party rather than a buy-back or a purchase by promoters or their associates.
Other obligations
- All existing Angel Funds are treated as registered under Category I AIF – Angel Funds, a category of their own rather than a sub-category of venture capital funds.
- The annual PPM compliance audit applies only to Angel Funds whose total investments at cost exceed ₹100 crore, modifying para 2.4.4 of the Master Circular.
- Angel Funds report investment-wise valuation and cash-flow data to the benchmarking agencies. Where past performance appears in a PPM or in marketing material, the benchmarking agency's performance-versus-benchmark report must accompany it. Para 16.6 of the Master Circular was deleted.
- Limits calculated on corpus or investable funds are henceforth calculated on total investments at cost.
Both the PPM audit and the benchmarking obligations applied from financial year 2025-26.
Who this reaches
Every Angel Fund and every angel investor in one. The accredited-investors-only mandate is the change with the widest consequence: an angel investing through a fund must now hold accreditation from a SEBI-empanelled agency, or be deemed accredited, which is a status conferred by a third party rather than a self-declaration.
What is not settled
The circular requires benchmarking reports to accompany any statement of past performance, but performance-versus-benchmark reports are issued to the fund and its investors, not published. Nothing here creates a public, comparable performance figure for Angel Funds, and none exists.
Sources
- Revised regulatory framework for Angel Funds under AIF Regulations — SEBI/HO/AFD/AFD-POD-1/P/CIR/2025/128 — SEBI, 10 September 2025 · primary
- Revised Angel Fund framework circular, full text, 5 pages — SEBI, 10 September 2025 · primary
Dated 10 September 2025, last checked against source 25 August 2026. The dateline is the date of the instrument this item reports, not the date the page was written. This page reports what a document says. It is information, not legal, tax or investment advice, and it is not a recommendation about any fund.