SEBI Angel Fund Overhaul September 2025: Every Investor Must Now Be Accredited

SEBI Angel Fund Overhaul September 2025: Every Investor Must Now Be Accredited

SEBI's September 2025 amendment to the AIF Regulations fundamentally changed what an angel fund is and who can participate in one. Before September 2025, angel funds could admit retail investors with a minimum ticket of ₹25 lakh. After September 2025, every investor in an angel fund must be an accredited investor — no exceptions.

This change has significant operational consequences for fund managers, angels currently invested in existing funds, and startup founders seeking angel money through registered AIF structures.

What September 2025 Changed

SEBI (Alternative Investment Funds) (Fourth Amendment) Regulations, 2025 — notified in September 2025 — made three material changes to the angel fund framework under Category I AIF:

Change 1 — Universal accreditation requirement. Every investor in a new angel fund must be SEBI-accredited. The previous carve-out allowing non-accredited investors at a ₹25 lakh minimum has been removed. For existing funds, new investors joining after the amendment date must be accredited.

Change 2 — Minimum investment threshold revised. The minimum investment per scheme by any investor has been revised from ₹25 lakh to ₹10 lakh per investment. This is a significant reduction — but it is made irrelevant in practice by the accreditation requirement, which itself gates out most retail investors.

Change 3 — AIF lock-in tenure. The minimum lock-in for angel fund investments has been revised from 1 year to 6 months from the date of investment in the investee company. This provides more flexibility for secondary transfers among accredited investors.

What Is an Angel Fund (and Why It Matters)

Angel funds are Category I AIFs registered under the SEBI (AIF) Regulations, 2012. They pool money from angel investors and deploy it into early-stage startups — typically DPIIT-recognised startups in their seed to Series A stages. The AIF structure provides regulatory clarity: the fund manager handles KYC, compliance, and SEBI reporting; angel investors participate through a managed vehicle rather than making direct investments that require their own due diligence infrastructure.

Before the September 2025 amendment, angel funds were one of the more accessible AIF structures — ₹25 lakh minimum and no accreditation requirement made them reachable for a broader set of high-net-worth individuals. The September 2025 amendment tightened the profile significantly.

Operational Impact for Fund Managers

Existing angel funds: New investors joining an existing scheme post-amendment must be accredited. Existing investors who were admitted before the amendment are grandfathered — the amendment does not require existing non-accredited investors to exit. However, if they make additional investments into new schemes of the same fund, accreditation applies.

New angel fund registrations: All investors in new schemes must be SEBI-accredited from the first close. Fund managers need to build accreditation verification into their onboarding process — CVL/BAADS certificates must be obtained, verified for validity (one year), and archived.

CA's certificate volume: Every new angel fund investor needs a CA-certified net worth certificate in the post-January 2026 SEBI format (see the companion article on the updated certificate format). Fund managers are now including the CA certificate as a standard onboarding document alongside KYC.

Accreditation Qualification for Angel Investors

Angel investors — typically founders, operators, and senior professionals — commonly qualify under the combined criterion: income ≥ ₹1 crore AND net worth ≥ ₹5 crore (with ₹2.5 crore in financial assets). The pure income threshold (₹2 crore) is also achievable for senior executives with large ESOPs or RSU income in a vesting year.

The net worth threshold (₹7.5 crore with ₹3.75 crore financial assets) applies more often to founders who have had a liquidity event.

Angel investors who do not yet meet any threshold cannot participate in SEBI-registered angel funds after September 2025. Direct investments into startups (not through an AIF structure) remain available without accreditation requirements — the accreditation requirement is specific to the AIF vehicle.

What This Means for Startup Founders

Angel funds registered under SEBI provide startup founders with: a counterparty that has completed RBI/FEMA compliance for the investment; SEBI-compliant term sheets and shareholder agreements; and a structured vehicle that simplifies future rounds when auditors or lead investors ask about the cap table.

The practical implication of the September 2025 amendment: founders seeking angel money through AIF structures should now expect all their early investors to be formally accredited. This is generally not a problem for GIFT City or Series A-focused startups — but it does narrow the pool for very early-stage companies relying on smaller cheque sizes from a wider group of friends and family.

I'm CA Harun Raaj, Visakhapatnam. If you are an angel investor currently investing through an AIF structure, or a fund manager updating your onboarding post-September 2025, the accreditation and CA certificate workflow should be reviewed.

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