A S BANKA ADVISORS

If your next round includes money pooled through an angel fund, one question decides who can come in: is each investor in that fund an accredited investor? Under regulation 19D(1) of the SEBI (Alternative Investment Funds) Regulations, 2012, an angel fund may raise funds only from accredited investors. From 15 October 2026, the definition of who qualifies has changed. The SEBI (Alternative Investment Funds) (Third Amendment) Regulations, 2026 (notification No. SEBI/LAD-NRO/GN/2026/326) amend regulation 2(1)(ab), and the change is now law, not a Board approval.

Three investors now need a fresh look against the amended text: the investor who lives abroad, the investor whose wealth sits mainly in listed shares, and the investor who comes in through an LLP.

What the amended definition now says

Regulation 2(1)(ab) now describes an accredited investor as a person granted a certificate of accreditation by an accreditation agency “or who is accredited by a specified SEBI registered/regulated entity as an accredited investor, as per the following eligibility conditions, in a manner as may be specified by the Board from time to time”. The eligibility conditions read as follows.

What this means for your round

The investor who lives abroad. The proviso to regulation 2(1)(ab) lists the entities deemed to be accredited investors. Persons resident outside India, as defined under the Foreign Exchange Management Act, 1999, are now on that list. The words “Category I foreign portfolio investors, sovereign wealth funds and” have been omitted from it. If an angel fund you are raising from has investors resident outside India, ask the manager how it now treats them under the amended proviso.

The investor whose wealth sits in listed shares. Test (D) adds securities market exposure of at least Rs 5 crore for individuals, HUFs, family trusts and sole proprietorships. The regulation does not define “securities market exposure”; each time it uses the term it adds “as specified by the Board”. How exposure is measured is therefore for SEBI to specify. Before an investor relies on this test, check SEBI’s circulars for the specification.

The investor who comes in through an LLP. Before the amendment, the clause read “in case of a body corporate, has net worth of at least fifty crore rupees”, with no separate clause for LLPs. An LLP now has its own clause: Rs 50 crore net worth, Rs 20 crore securities market exposure, or each partner independently meeting the eligibility criteria. If a small LLP holds a family’s investments, test the each-partner route alongside the net worth and exposure tests.

Who does the accrediting. The certificate from an accreditation agency continues. The second route, accreditation by a specified SEBI registered or regulated entity, is new, but the regulation leaves to SEBI both which entities may accredit and the manner of doing it. Plan your closing timeline on the route that is available to your investors on the day they invest.

What has not changed

• Income and net worth tests (A) to (C) for individuals are the same as before.
• Older angel funds keep their date. Under SEBI’s circular of 7 September 2026, angel funds registered on or before 10 September 2025 must implement the accredited investor mandate on or before 31 March 2027, may not offer investment opportunity to more than 200 non-accredited investors during this period, and may not accept contribution for investment in an investee company from non-accredited investors after 31 March 2027.

One change is for fund managers. Regulation 25 has been substituted: where investor disputes arise, any loss, damage or expenses incurred by the Manager or its officers, including in resolving investor claims or disputes, “shall not be met out of property of the Alternative Investment Fund”. Before the amendment this bar applied only where the AIF was set up as a trust; it now applies to every AIF.

Your checklist before the next close

1. Ask the angel fund for its registration date and whether the 31 March 2027 timeline applies to it.
2. Map each investor joining through the fund against regulation 2(1)(ab) as amended from 15 October 2026, not against the Board decision of 24 September 2026.
3. Re-test LLP, body corporate and non-family trust investors against the new clauses (ii) to (iv).
4. For any investor relying on the exposure test or the new accreditation route, check SEBI’s circulars for the specification first.

The full carousel sets out the before and after tests, the deemed list and the key dates: Download the full carousel PDF.

Source: SEBI (Alternative Investment Funds) Regulations, 2012, as amended up to 15 October 2026, regulations 2(1)(ab), 19D and 25, sebi.gov.in. Source: SEBI (Alternative Investment Funds) (Third Amendment) Regulations, 2026, notification No. SEBI/LAD-NRO/GN/2026/326, sebi.gov.in. Source: SEBI Circular HO/19/34/11(7)2025-AFD-POD1/I/20626/2026, “Relaxation in timeline with respect to Accredited Investor mandate for Angel Funds”, 7 September 2026, sebi.gov.in.

Need help navigating this? Book a quick call: talk to A S Banka Advisors Private Limited about your angel fund round.