CHAPTER - III

REGULATION OF THE BUSINESS OF VENTURE CAPITAL FUND

9. Eligibility conditions for grant of licence to a venture capital fund.- (1)  A venture capital fund shall not be granted licence unless it fulfills the following conditions, namely :-

(a)    it is incorporated as a company under the Companies Ordinance, 1984 (XLVII of 1984);

(b)    it is not engaged in any business other than that of investment in venture projects;

(c)    it has a minimum paid-up capital of fifty million rupees raised through private placement; and

(d)    for the purpose of managing its entire business, it has entered into a contract, in writing, with a venture capital company and a copy of which has been filed with the Commission.

(2)    The board of venture capital fund shall not have a director, who is on the board of any venture project being financed by the fund.

10. Condition for grant of licence.- (1)  No venture capital fund shall commence business unless a licence is granted under these rules.

(2)    For obtaining a licence a venture capital fund shall

(a)    make an application to the Commission on Form V providing information as sought in Annex therein, along with all the relevant documents;

(b)    submit a bank draft payable to the Commission evidencing the payment of non-refundable application processing fee amounting to fifty thousand rupees; and

(c)    submit an undertaking that no change in the memorandum and articles of association and in the directors shall be made without prior written authorization of the Commission and that all conditions for grant of licence shall be complied with.

(3)    On being satisfied that a venture capital fund is eligible for the grant of a licence and that it would be in the public interest so to do, the Commission may grant a licence in form VI.

(4)    Without prejudice to any other conditions under these rules, the Commission may while granting licence impose any conditions, as it may deem necessary.

11. Terms and conditions of operation.-  Unless granted a general or specific waiver by the Commission, a venture capital fund shall __

(a)   not expose more than forty per cent of its equity to any single group of companies;

Explanation.- For the purposes of this rule group of companies shall mean companies managed by the members of one family including spouse, dependent lineal ascendants and descendants and dependent brothers and sisters.

(b)   disclose in its accounts all investments in companies and group of companies exceeding ten per cent of paid-up capital of venture capital fund;

(c)   ensure that the maximum exposure of the venture capital fund to its directors, affiliated companies and companies in which any of the directors and their family members including spouse, dependent lineal ascendants and descendants and dependent brothers and sisters hold controlling interest shall not exceed ten per cent of the overall portfolio of venture capital; and

(d)   not accept any investment from any investor, which is less than one million rupees.

12. Renewal of licence.- (1) The licence granted to the fund under rule 10 shall be valid for one year and shall be renewable annually on payment of a fee of twenty thousand rupees on an application being made on Form VII.

(2)   The Commission may, after making such inquiry and after obtaining such further information as it may consider necessary, renew the licence of such fund, one year on Form VIII on such conditions as it may deem necessary.

13. Private placement.- A venture capital fund shall raise and receive monies for investment in venture projects through private placement of such securities as may be notified by the Commission, from time to time.

14. Placement memorandum.- A venture capital fund shall, before soliciting placement of its securities, file with the Commission a placement memorandum which shall inter alia give details of the terms subject to which monies are proposed to be raised from such placements.