Angel Investment in India: An insight into

[2021] 128 taxmann.com 257 (Article)

Among the different ways of building wealth in these modern times, Angel investing provides opportunities for not only generating wealth but shaping the future as well. An average stock market investor only picks stock from publicly traded companies, whereas an angel investor who invests in the early stage of the Company has a chance to make it go Public later. Angel investors fund innovative ideas which other investors miss in the Start-up world.

So who is this Angel Investor?

An Angel Investor is an individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. Angel investors usually give support to start-ups at the initial moments and when most investors are not prepared to back them.

The legal definition of an “Angel investor” states that it is any person who proposes to invest in an angel fund and satisfies one of the following conditions, namely,

(a) an individual investor who has net tangible assets of at least two crore rupees excluding the value of his principal residence, and who:

(i) has early-stage investment experience, or

(ii) has experience as a serial entrepreneur, or

(iii) is a senior management professional with at least ten years of experience;

(b) a body corporate with a net worth of at least ten crore rupees; or

(c) an AIF (Alternate Investment Fund) registered under AIF regulations(Alternative Investment Fund Regulations, 2012) or a VCF (Venture Capital Fund)registered under the SEBI (Venture Capital Funds) Regulations, 1996.

What is an ‘Angel Fund’?

“Angel Fund” is a sub-category of Venture Capital Fund under Category I Alternative Investment Fund that raises funds from angel investors and invests in accordance with the provisions of Chapter III-A of AIF Regulations. Angel funds can accept, up to a maximum period of 3 years, an investment of not less than INR Rs. 25 lakh from an angel investor.

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