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SEBI Additional Guidelines on Overseas Investment by an AIF/VCF

As per Regulation 12(ba) of the erstwhile Venture Capital Securities and Exchange Board of India (“SEBI”) (Venture Capital Funds) Regulations 1996 (“VCF Regulations”) and Regulation 15(1)(a) of SEBI (Alternative Investment Funds) Regulations, 2012 (“AIF Regulations”), the venture capital funds registered under the erstwhile VCF Regulations (“VCF”) and the alternate investment funds registered under the AIF Regulations (“AIF”) can invest in securities of companies incorporated outside India subject to conditions as prescribed by the Reserve Bank of India and SEBI.

SEBI had earlier issued guidelines in 2007 related to overseas investments by the VCFs[1] (“2007 Guidelines”) and then in 2015 related to overseas investments by AIFs/VCFs[2] (“2015 Guidelines”).

This note will discuss the latest guidelines issued by SEBI on 17 August 2022[3] (“2022 Guidelines”) in regard to overseas investments by AIFs and VCFs.

1. No requirement of the Indian Connection

1.1.Under the 2007 Guidelines and the 2015 Guidelines, the AIF/VCF could invest only in such overseas company which had an ‘Indian Connection’.

1.2. ‘Indian Connection’ basically meant that the overseas investee company should have a front office overseas while the back office operations should be in India.

1.3. However, the 2022 Guidelines have done away with the requirement of ‘Indian Connection’

2. Additional new conditions

While the 2022 Guidelines have removed the ‘Indian Connection’ requirement, these have imposed some additional new conditions for the overseas investment by AIF/VCF. These are:

2.1. AIF/VCF can only invest in an overseas investee company which is incorporated in a country whose securities market regulator is either a signatory to the International Organization of Securities Commission’s Multilateral Memorandum of Understanding (Appendix A Signatories)[4] or a signatory to the bilateral Memorandum of Understanding with SEBI[5].

2.2. AIF/VCF cannot invest in an overseas investee company which is incorporated in a country identified in the public statement of the Financial Action Task Force (“FATF”) as:

a. a jurisdiction having a strategic Anti-Money Laundering or Combating the Financing of Terrorism deficiencies to which counter measures apply; or

b. a jurisdiction that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with FATF to address the deficiencies

2.3. If an AIF/VCF liquidates investment made in an overseas investee company previously, the sale proceeds received from such liquidation, to the extent of investment made in the said overseas investee company, will be available to all AIFs/VCFs (including the selling AIF/VCF) for reinvestment.

2.4. AIF/VCF can sell/transfer their investment in the overseas investee company only to those entities which are eligible to make overseas investments as per guidelines issued under the Foreign Exchange Management Act, 1999.

2.5. In the event of sale/divestment, the AIF/VCF should furnish the details of the sale/divestment to SEBI in the format provided in Annexure B of the 2022 Guidelines within 3 (three) working days of the sale/divestment. The details can be mailed to

2.6. Further, within 30 (thirty) days from the date of the 2022 Guidelines (i.e., 17 August 2022), the AIF/VCF should report the entire details of the overseas investments sold/divested till date by emailing to The details can be sent in the format provided in Annexure B of the 2022 Guidelines.

2.7. The trustee/board/designated partners of the AIF/VCF should submit an undertaking to SEBI as provided in Annexure A of the 2022 Guidelines with respect to the proposed overseas investment.

3. It should be noted that the 2022 Guidelines have not repealed the 2007 Guidelines and 2015 Guidelines except the requirement of ‘Indian Connection’. Therefore, the AIF/VCF should also keep in mind to comply with the requirements in the 2015 Guidelines and 2007 Guidelines also.

4. Overseas investment limit

4.1. SEBI, from time to time, issues circulars on the maximum overseas investment limit. As per the latest circular issued on 21 May 2021, SEBI has extended the overseas investment limit to USD 1,500 million.[6]

4.2. AIFs/VCFs are required under the 2022 Guidelines to apply to SEBI for allocation of overseas investment limit in the format prescribed at Annexure A of the August Guidelines.

5. Disclaimer

Please note that this note is for general awareness purposes and does not constitute professional legal advice. If you have any questions, please contact or

6. Footnotes

[1] [2] [3] [4] To view the list of the Appendix A Signatories to the International Organization of Securities Commission’s Multilateral Memorandum of Understanding, click here: [5] To view the list of countries whose security market regulator has signed bilateral Memorandum of Understanding with SEBI, click here: [6]


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