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SEBI Launches ‘VCF Settlement Scheme 2025’ to Wind Up Legacy Venture Capital Funds from July 21.

Banking & Finance | Dated: 17 Jul 2025

In a major regulatory move, the Securities and Exchange Board of India (SEBI) has unveiled the VCF Settlement Scheme 2025, designed to assist legacy Venture Capital Funds (VCFs) that have not yet completed their liquidation processes. The scheme, which opens on July 21, 2025, will be active until January 19, 2026, providing an official window for compliance before enforcement actions begin.

🎯 Key Highlights:

  • - SEBI originally repealed the Venture Capital Funds Regulations in May 2012 following the introduction of the Alternative Investment Fund (AIF) Regulations. At that time, all VCFs were advised to transition to AIFs and complete their winding-up. However, a number of legacy funds failed to fully liquidate within their specified tenure, creating long-standing compliance gaps in the Indian fund management ecosystem.
  • - To address this, SEBI had offered a transition period up to July 19, 2025. With the transition window now closing, the VCF Settlement Scheme 2025 provides a structured opportunity for fund managers to comply and regularize their operations. The initiative focuses specifically on schemes whose tenures have expired but are still holding unliquidated investments.
  • - According to SEBI’s new framework, the scheme is only open to VCFs with at least one expired scheme that has not been wound up but has completed the migration process to AIF. Eligible applicants must submit their requests through SEBI’s Online Settlement Portal by paying a non-refundable application fee of ₹25,000 plus 18% GST.

💡 Other Important Facts:

  • (i) The settlement charges will depend on both time and fund corpus. A base amount of ₹1 lakh will be charged for delays up to one year, with an additional ₹50,000 per year (or part thereof) for continued delays. In addition, a slab-based penalty based on the size of the unliquidated corpus will be levied, ranging from ₹1 lakh to ₹6 lakh depending on the residual fund value.
  • (ii) SEBI has clearly stated that all penalties must be paid only by the investment manager or sponsor, and no costs shall be passed on to investors or fund assets. This strict provision ensures investor protection while assigning full accountability to fund operators for delays or non-compliance under the repealed VCF norms.
  • (iii) Any VCF that fails to utilize this one-time window before January 19, 2026, may face regulatory action, including adjudication proceedings under SEBI’s enforcement powers. The scheme reflects SEBI’s broader push to clean up legacy funds and strengthen compliance within India’s alternative investment industry.

📚 Test Your Knowledge:

Which organisation recently launched the ‘VCF Settlement Scheme 2025’ to facilitate the winding-up of legacy Venture Capital Funds?

Correct Answer: SEBI

🚀 Quick Recap:

About SEBI

  • Chairperson: Tuhin Kanta Pandey
  • Headquarter : Mumbai