Restriction on Investment by VCF Homework Help

Restriction on Investment by VCF

The VCFs should, one, disclose the Investment strategy at the time of their registration. Two, they cannot invest more than 25 per cent corpus of the fund in one VCU. Three, they are prohibited from investing in associated companies. An associate company means a company which a director trustee sponsor settler of the VCF asset management company holds individually collectively equity shares in excess of 15 per cent of the paid up capital of the VCU. Moreover, at least 75 per cent of the indigestible funds (i.e. corpus of the fund net of expenditure for administration and management of the fund) of VCFs should be invested in unlisted equity shares equity linked instruments (i.e. convertible securities share warrants preference shares, debentures compulsorily convertible into equity). Finally, not more than 25 per cent may be invested by way of (a) subscription to initial public offer whose shares are proposed to be listed subject to a lock In of one year and (2) debt, debt Instruments of a VCU in which the VCF has already made an investment by way of equity.

Prohibition on Listing

No VCF would be entitled to get its units listed on any recognized stock exchange till the expiry of three years from the date of issuance of units by it.

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