Impact of SEBI's new regulatory framework for Angel Investments on Angel Investors in India
- CA Kartikeyan Khator
- Sep 15
- 4 min read
In its 210th board meeting published in PR No.33/2025, and circular number SEBI/HO/AFD/AFD-POD-1/P/CIR/2025/128 dated 10th September, 2025, SEBI (Securities and Exchange Board of India) has approved a significant overhaul of the regulatory framework for Angel Funds under the SEBI (Alternative Investment Funds) Regulations, 2012, (“AIF Regulations”) and the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (“ICDR Regulations”). The new set of amendments propose to rationalize Angel Funds’ fund raising and enhance ease of doing business, key changes include:
Only Accredited Investors (AIs) can invest in Angel Funds (more on this below)
AIs will be treated as Qualified Institutional Buyers (QIBs) for the limited purpose of investing in Angel Funds – to bypass the private placement limit of 200 investors under the Companies Act.
Investment thresholds in investee companies have been widened: from INR 25 lakhs – ₹10 crores to ₹10 lakhs - ₹25 crores.
The 25% concentration cap on investments in a single startup has been removed; minimum investor limits and fund‑raise mechanisms have been relaxed.
The most significant change that directly impacts individual investors is the significant shift of the framework from self-declaration to external certification, and the jump of net-worth criteria. Here’s how it compares to the earlier norms:
Before this amendment, “Angel Investor” was defined by SEBI as any person who proposes to invest in an Angel Fund, and who, among other things, being an individual has a net-worth of more than ₹2 Crores, and being a body corporate, has a net-worth of more than ₹10 Crores. Such threshold limits were required to be self-declared by the individuals or entities at the time of contribution to Angel Funds.
After the amendment, Angel Investors are now required to be “Accredited Investors” who are certified as such by an accrediting agency on satisfaction of the following criteria:
In case of an individual, HUF, family trust or sole proprietorship has:
annual income of at least ₹2 Crores; or
net worth of at least ₹7.5 Crores, out of which not less than ₹3.75 Crores is in the form of financial assets; or
annual income of at least ₹1 Crore and minimum net worth of ₹5 Crores, out of which not less than ₹2.5 Crores is in the form of financial assets.
in case of a body corporate, has net worth of at least ₹50 Crores;
in case of a trust other than family trust, has net worth of at least ₹50 Crores;
in case of a partnership firm, each partner independently meets the eligibility criteria for accreditation.
Now the question is, which investors are really affected by this amendment. Is it only the investors participating through an AIF investment vehicle or is it individual investors as well who invest directly in startups? More so, because there is a general confusion in the ecosystem that whether this amendment also impacts individual investments made by individuals directly into startups, who are also known as angel investors or angels in common parlance. To understand this, we need to understand the crucial distinction between Angel Funds and Direct Investments:
Angel Funds – Angel Funds are defined in the AIF Regulations as a sub-category of Venture Capital Fund under Category I - Alternative Investment Fund that raises funds from angel investors and are regulated by SEBI. While Angel Investors are specifically defined by SEBI in the AIF Regulations as any person who proposes to invest in an Angel Fund. Therefore, it is pertinent to note that the change in the regulatory framework is only applicable on individuals or entities who wish to contribute to an Angel Fund (like AhVentures, IvyCap Ventures, Soonicorn Ventures, etc.), that is registered as an AIF with SEBI to manage the funds contributed by Angel Investors.
Direct Investments – Individuals who directly invest in startups and directly sit on the cap-table of the startup venture as a shareholder, do not fall in the purview of SEBI regulations, despite commonly known as “Angel Investors”, and therefore they can continue to invest directly, without any accreditation or net-worth criteria.
Angel Networks – Individuals who invest through angel networks, like Indian Angel Network and Chennai Angels, can also continue to do so without any accreditation or net-worth criteria, as they would directly invest into the startup without any involvement of any SEBI regulated AIF vehicle in between.
Summary
The revamped accreditation regime applies only to Angel Funds - SEBI-registered pooled vehicles. Individuals investing directly into startups, or via angel networks, are unaffected by these changes. It's a reform affecting the structure of fund-based investing, not the act of direct angel investing.
Individuals who were investing in startups via Angel Funds, who do not meet the criteria for accreditation, can still invest but they won’t be able to do it through a registered Angel Fund. Instead, they will have to come under Companies Act private placement rules, which is accompanied with proper filings (PAS-3, PAS-4), and pricing compliance on an individual level. If the cheque comes from abroad, FEMA compliances must be adhered to too. Therefore, angels aren’t locked out, they just need to be compliant in the old-school way of investing instead of relying on the Angel Fund route.
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Disclaimer: The material herein is provided for informational purposes only. The information should not be viewed as professional, legal or other advice. Professional advice should be sought prior to actions on any of the information contained herein. CKA is not responsible for any matter concluded by any person based on the contents of this article.