India’s stock market regulator is considering relaxing a key provision of its plan to create an India crowdfunding platform for small enterprises, as it pursues efforts to create a fund-raising regime that reflects the thriving entrepreneurial activity in the country.
The provision concerns the number of accredited investors who can participate in the crowdfunding exercise, currently limited at 200.
In late March, Reuters first reported that the Securities and Exchange Board of India (Sebi) was considering an alternative investment platform, aimed at encouraging some of India’s hot Internet start-ups to list at home by relaxing some key requirements.
In April, the regulator proposed allowing venture capital funds to invest up to 25% of their funds in foreign companies with an Indian connection, a move that experts said would benefit many Indian start-ups that are now being incorporated outside the country, with back offices and development and delivery centres usually being housed within the country.
Sebi’s proposal was an attempt to solve the funding problems of start-ups and small companies. However, by sticking to the framework of the new companies law, the regulator limited the number of investors and also prohibited the companies from publicizing their efforts through ads on other media channels. The two restrictions didn’t go down well with companies, said a person familiar with the matter who asked not to be identified.
Sebi is now considering an exemption to these rules for start-ups with the corporate affairs ministry, said a second person familiar with the matter who too asked not to be identified. “The exemption will make the norms similar to those followed in the US for crowdfunding.”
Review the current SEBI India Crowdfunding discussion:
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