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, extended to 31 March 2027; 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. The circular of 7 September 2026 extended the accredited-investor mandate in para 8.1.2 of the Master Circular but left para 8.2.2 alone, so this first-close date was not moved with it.
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 8 September 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.