Mint Explainer: How variable capital cos will boost fund flow in Gift IFSC
Mint explores the details of VCCs and how they are likely to be attractive to overseas investors. Unlike typical funds where investors share risks and rewards uniformly, a VCC allows for sub-pools with different investment objectives, investors, and asset classes, all governed by the same board and managed by a single fund manager, custodian, auditor etc. Under the current Securities and Exchange Board of India (Sebi) and International Financial Services Centres Authority (IFSCA) regulations, an AIF may be set up as a trust, an LLP or a company.
However, a VCC would necessarily have to be a company or at least an incorporated entity, said Vinod Joseph, partner at Economic Laws Practice. Many regulations applicable to companies would need to be disapplied to give flexibility to VCCs, he added. However, the legal aspects of governing the VCC structure are still not clear.
“It remains to be seen how the government will operationalize the VCC structure, whether it will be done under the Companies Act, 2013 or under a different law," Joseph said. Investors and industry experts have cheered the introduction of the structure. They believe that the move would create sources of capital beyond just the private equity and venture capital ecosystem and will give another avenue for early-stage companies and founders to raise funds in a constrained environment.
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