What is the regulation?
Effective September 30, 2024, Indian regulations now require most private companies registered in Indian to hold their securities in dematerialized or “demat” format (i.e. digital format). Indian companies subject to the regulations must facilitate the dematerialization of company shares, including U.S. shareholders, and may only offer or transfer securities in dematerialized form.
Whether the fund is required to open a demat account depends on the status and circumstances of the Indian portfolio company, as exceptions may apply. For example, Indian companies that fall within the definition of a "small company" are exempt from the dematerialization requirements.
We strongly encourage you to confer with the portfolio company and your own legal counsel to determine if it is required or advisable for your fund to open a demat account at this time, or to reserve capital in case it becomes required or advisable in the future.
Does this apply to my fund?
This obligation only applies to certain funds that have or plan to make investments in Indian portfolio companies. The regulation does not apply if your fund has not invested and does not plan to invest into one or more portfolio companies registered under Indian Laws (incorporated under the Companies Act of 1956 or 2013).
If your fund plans to invest in an Indian company, your fund may be required to obtain a Permanent Account Number (PAN) and open a demat account at a recognized financial institution in order to participate in the fundraising round. Additionally, AngelList may require the fund to reserve fees for demat expenses, as well as require representations from you and the portfolio company prior to closing. Even if your fund is not subject to demat requirements at this time, this may change in the future.
We strongly encourage all fund managers investing in Indian companies to confer with the portfolio company and your own legal counsel to determine if it is required or advisable for your fund to open a demat account, or to reserve capital in case it becomes required or advisable in the future.
Is there an alternative to complying?
The regulation carves out certain exemptions. You should consult directly with the portfolio companies and your legal counsel to determine the requirements for your fund’s unique circumstances. Even if your fund is AngelList-advised, it is not possible for us to determine whether your fund is exempted from this requirement without information from the portfolio company.