Securities and Exchange Board of India (Foreign Venture Capital Investors) Regulations 2000 outlines a broad framework for the registration of foreign venture capital investors (FVCIs) so as to permit them to carry on business in India. Under the regulations, the term 'foreign venture capital investor' means "an investor incorporated and established outside India, is registered under these regulations and proposes to make investment in accordance with these regulations". The regulations also provide investment criteria's of FVCIs; their general obligations and responsibilities; inspection/ investigation of their conduct and affairs; as well as procedure for action in case of any default.

The main provisions of the SEBI (Foreign Venture Capital Investors) Regulations 2000 are:-

• For the purposes of seeking registration, the applicant shall make an application to the Board in Form A , as specified in the first schedule of the regulations, along with the application fee as specified in the second schedule.
  
  



• For the purpose of the grant of a certificate to an applicant as a foreign venture capital investor, the Board shall consider the following conditions for eligibility, namely: -
  
  
  • The applicants track record, professional competence, financial soundness, experience, general reputation of fairness and integrity;
  
  
  
  • Whether it has been granted necessary approval by the Reserve Bank of India for making investments in India;
  
  
  
  • Whether it is an investment company, investment trust, investment partnership, pension fund, mutual fund, endowment fund, university fund, charitable institution or any other entity incorporated outside India; or
  
  
  
  • Whether it is an asset management company, investment manager or investment management company or any other investment vehicle incorporated outside India; 
  
  
  
  • Whether it is authorised to invest in venture capital fund or carry on activity as a foreign venture capital investors;
  
  
  
  • Whether it is regulated by an appropriate foreign regulatory authority or is an income tax payer;or submits a certificate from its banker of its or its promoter's track record where the applicant is neither a regulated entity nor an income tax payer;
  
  
  
  • It has not been refused a certificate by the Board;
  
  
  
  • Whether it is a fit and proper person, as per the provisions of the Securities and Exchange Board of India (Criteria for fit and proper person) Regulations, 2004.
    
    



• The Board may require the applicant to furnish such further information as it may consider necessary.
  
  



• An application which is not complete in all respects shall be rejected by the Board. However, before rejecting any such application, the applicant shall be given an opportunity to remove, within thirty days of the date of receipt of communication, the objections indicated by the Board.
  
  



• If the Board is satisfied that the applicant is eligible for the grant of certificate, it shall send an intimation to the applicant. On receipt of intimation, the applicant shall pay to the Board, the registration fee as specified in the Part A of the second schedule. Thereafter, the Board shall grant a certificate of registration in Form B.
  
  



• The certificate granted to the foreign venture capital  investor shall be subjected to the following conditions, namely:-
  
  
  • It shall abide by the provisions of the Securities and Exchange Board of India Act, 1992 and these regulations;
  
  
  
  • It shall appoint a domestic custodian for the purpose of custody of securities;
  
  
  
  • It shall enter into arrangement with a designated bank for the purpose of operating a special non-resident rupee or foreign currency account.
  
  
  
  • It shall forthwith inform the Board in writing if any information or particulars previously submitted to the Board are found to be false or misleading in any material particular or if there is any change in the information already submitted.
    
    



• If the Board is of the opinion that a certificate should not be granted, it may reject the application after giving the applicant a reasonable opportunity of being heard. Such an applicant shall not carry on any activity as a foreign venture capital investor.
  
  



• All investments to be made by a foreign venture capital investors shall be subjected to the following conditions: -
  
  
  • It shall disclose to the Board its investment strategy.
  
  
  
  • It shall invest its total funds committed in one venture capital fund.
  
  
  
  • It shall invest a certain prescribed percentage of the investible funds in unlisted equity shares or equity linked instruments of venture capital undertaking.
  
  
  
  • It shall disclose the duration of life cycle of the fund, etc.
    
    



• Every foreign venture capital investor shall maintain for a period of eight years, books of accounts, records and documents which shall give a true and fair picture of its state of affairs. It shall intimate to the Board, in writing, the place where these books, records and documents are being maintained.
  
  



• Foreign venture capital investor shall ensure that domestic custodian takes steps for:- (i) monitoring of investment of foreign venture capital investors in India; (ii) furnishing of periodic reports to the Board; and (iii) furnishing such information as may be called for by the Board.
  
  



• The Board may, suo-moto or upon receipt of information or complaint, cause an inspection or investigation to be made in respect of conduct and affairs of any foreign venture capital investor by an officer whom the Board considers fit for any of the following reasons, namely:-
  
  
  • To ensure that the books of account, records and documents are being maintained by the foreign venture capital investor in the manner specified in these regulations.
  
  
  
  • To inspect or investigate into complaints received from investors, clients or any other person, on any matter having a bearing on the activities of the foreign venture capital investor;
  
  
  
  • To ascertain whether the provisions of the Act and these regulations are being complied with by the foreign venture capital investor; and
  
  
  
  • To inspect or investigate suo-moto into the affairs of a foreign venture capital investor in the interest of the securities market or in the interest of investors.
    
    



• It shall be the duty of every foreign venture capital investor, in respect of whom an inspection or investigation has been ordered, to produce to the inspecting or investigating officer such books, accounts and other documents in his custody or control and furnish him with such statements and information as the said officer may require for the purposes of the inspection or investigation.
  
  



• The inspecting or investigating officer shall, on completion of inspection or investigations, submit a report to the Board. The board may after consideration of the report and after giving a reasonable opportunity of hearing to the foreign venture capital investor, require it to take such measure or issue such directions as it deems fit in the interest of capital market and investors, including directions in the nature of:-
  
  
  • Requiring the person concerned to dispose of the securities or disinvest in a manner as may be specified in the directions;
  
  
  
  • Requiring the person concerned not to further invest for a particular period;
  
  
  
  • Prohibiting the person concerned from operating in the capital market in India for a specified period.
    
    



• The Board may suspend the certificate where the foreign venture capital investor:- (i) contravenes any of the provisions of the Securities and Exchange Board of India Act or these regulations; (ii) fails to furnish any information relating to its activity as a foreign venture capital investor as required by the Board; (iii) furnishes to the Board information which is false or misleading in any material particular; (iv) does not submit periodic returns or reports as required by the Board; and (v) does not co-operate in any enquiry or inspection conducted by the Board.

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