Indian Dematerialization Requirements - Implementation FAQs

Does this regulation apply to my fund if I have Indian LPs?

This regulation only applies to funds that have live investments in Indian portfolio companies. It is not affected by the nationalities of your fund’s LPs.

Does AngelList offer demat account setup services?

At this time, AngelList does not support obtaining Indian Dematerialization accounts for new investments. If you believe your fund is or will become subject to the dematerialization requirements as a result of an investment into an Indian portfolio company, contact your AngelList account representative. Fund managers are responsible for complying with the Indian dematerialization requirements and the costs associated with obtaining a Dematerialization account on behalf of the fund, should one be required.

Does my fund have to get a demat account now or can it wait? What happens if I do not open an account?

Whether your fund is required to open a demat account depends on the status and attributes of the portfolio company that it invests in or plans to invest in. 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.

Failure to timely open a demat account and dematerialize shares could impact the fund's ability to transfer or sell the shares, participate in follow-on offerings, or receive distributions. For example, portfolio companies subject to the dematerialization requirements are prohibited from issuing securities to shareholders unless they have a demat account.

Does my fund have to comply with the dematerialization requirements for investments made prior to the Sept. 30th compliance deadline?

If your fund has previously made investments into one or more Indian portfolio companies, you may be required to open a demat account and dematerialize the shares. Certain key shareholders may be required to dematerialize their holdings under Indian law. Even if your fund is not required to open an account under Indian law, a demat account may become necessary in the future based on the portfolio company's actions (e.g. additional fundraising or an exit).

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.

I am considering investing in an Indian company, should I open a demat account now?

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.

If your fund plans to invest in an Indian portfolio 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. It is best to confer with the portfolio company directly, as well as your own legal counsel, to determine if it is required or advisable for your fund to open a demat account prior to making an investment.

Additionally, AngelList may require the fund to reserve fees for demat expenses, as well as certain representations from the Fund Lead, Sub-Adviser (if applicable), and a portfolio company representative before proceeding with the investment.

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