SEBI drafts accreditation framework for investors to invest in start-ups

The Securities and Exchange Board of India (SEBI) on Wednesday drafted a framework for accreditation of investors to invest in start-ups. These start-ups would be listed on the IGP.

The IGP is created to facilitate listing of start-ups across various sectors such as e-commerce, data analytics, and biotechnology.

SEBI, in a circular, provided the framework including the eligibility criteria and the procedure to get accredited. The market watchdog has also mentioned the validity of the accreditation.

SEBI said that an individual is eligible if his/her gross income is more than Rs 50 lakh a year and has a minimum liquid net worth of Rs 5 crore. Corporates with net worth of Rs 25 crore are eligible.

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To get accredited, investors must have a demat account and they must submit an application to an exchange or a depository in the prescribed format.

SEBI has said that exchanges and depositories are responsible to verify and maintain a database of accredited investors.

The accreditation would be valid for a period of three years from the date of issuance. If the financial status of an accredited investor changes and makes them ineligible within the accredited period, then they must inform the exchange or depository.

Furthermore, the merchant bankers are entrusted with the responsibility of ensuring due diligence with respect to the eligibility of the accredited investors at the time of application by companies for IGP listing and also to ensure that their holding in the company desirous of listing is on the lines of the issue of capital and disclosure requirements norms (ICDR).