Description

SEBI adjudication order imposing penalties on Forum Synergies India Trust, its fund manager, and trustee for unauthorised extension of VCF scheme term beyond permissible limits under SEBI (Venture Capital Fund) Regulations, 1996.

Summary

SEBI’s Adjudicating Officer issued Order No. Order/JS/VC/2025-26/32145-32147 against three noticees — Forum Synergies India Trust (Noticee-1, a registered Venture Capital Fund), Forum Synergies (India) Fund Managers Private Limited (Noticee-2, the fund manager), and Vistra ITCL (India) Limited (Noticee-3, the trustee) — for violations relating to the unauthorised extension of the term of India Knowledge Manufacturing Fund-I, a scheme of the Forum Synergies India Trust.

Key Points

  • The VCF scheme had an original term of 7 years from first closing (November 5, 2010), extendable by a maximum of 2 years in two tranches of 1 year each under the PPM.
  • Noticee-2 (fund manager) extended the scheme term twice as permitted — first to November 4, 2018, then to November 4, 2019 — with approval from 75% of investors by value.
  • Beyond the permissible extensions, Noticee-2 obtained super-majority consent (>75%) from contributors for a further 3-year extension to November 4, 2022, which was not permitted under the VCF Regulations.
  • SEBI conducted an examination and initiated adjudication proceedings for violations of Regulation 23(1)(a) read with Regulation 23(3), and Regulation 24(2) read with Regulations 23(3) and 23(1)(a) of the SEBI (Venture Capital Fund) Regulations, 1996.
  • Show Cause Notice was issued on October 6, 2025; the Adjudicating Officer was appointed on August 28, 2025.
  • Penalty provisions invoked: Section 15HB of the SEBI Act, 1992, read with Regulation 39 of the SEBI (Alternative Investment Fund) Regulations, 2012.

Regulatory Changes

No new regulatory changes are introduced. This order reinforces the strict interpretation of permissible scheme term extensions under the SEBI (Venture Capital Fund) Regulations, 1996 — extensions beyond what is explicitly provided in the PPM and regulations require regulatory approval, not merely investor consent.

Compliance Requirements

  • VCFs and AIFs must strictly adhere to the scheme term and permissible extension periods as specified in their PPM and applicable regulations.
  • Fund managers cannot extend scheme terms beyond regulatory limits even with super-majority investor approval.
  • Trustees are equally responsible for ensuring compliance with VCF Regulations regarding scheme operations and term.
  • Any extension beyond permitted periods must have prior regulatory sanction, not just investor consent.

Important Dates

  • November 5, 2010: First closing of India Knowledge Manufacturing Fund-I (scheme term start).
  • November 4, 2017: Original scheme term expiry (7 years).
  • November 4, 2018: First permitted 1-year extension.
  • November 4, 2019: Second permitted 1-year extension (maximum permissible under PPM).
  • November 4, 2022: Unpermitted further 3-year extension obtained by Noticee-2.
  • August 28, 2025: Appointment of Adjudicating Officer.
  • October 6, 2025: Show Cause Notice issued (Ref. SEBI/HO/EAD-2/JS/VC/25977/1-3/2025).
  • February 2026: Adjudication order issued (Order/JS/VC/2025-26/32145-32147).

Impact Assessment

This enforcement action has moderate industry significance for the AIF/VCF sector. It clarifies that investor consent — even super-majority consent — cannot substitute for regulatory compliance when extending fund scheme terms. Fund managers and trustees of VCFs and AIFs should review their PPMs and ensure any term extensions are within regulatory bounds. The order may prompt SEBI scrutiny of other VCFs with similar histories of extended scheme terms. There is no direct impact on listed equities or broader market operations.

Impact Justification

Enforcement action against a VCF and its manager/trustee for regulatory violations on scheme term extension; relevant to AIF/VCF industry participants but limited direct market-wide impact.