BSEC to publish gazette of venture capital norms soon

“We are going to publish venture capital rules soon for allowing startups and small businesses to raise fund through venture capital,” said BSEC Chairman  M Khairul Hossain yesterday. Khairul was speaking at a seminar on “Venture Capital for Startups” arranged on the sidelines of a three-day flagship annual event of the country’s ICT sector with the theme “Non-stop Bangladesh” in the city. “For listing small companies having low-paid capital, we are formulating the rules. This will help boost the stock market,” said the BSEC chief. On June last year, the capital market watchdog unveiled the guidelines called the “Bangladesh Securities and Exchange Commission (Alternative Investment) Rules, 2015” to govern the venture capital firms. The rules came into force immediately after publication in the official gazette. Over the past several years, venture capital firms that are relatively new in the country have been operating their businesses in absence of such rules. Under some excerpts from the slew of new norms, venture capital fund could be invested primarily in non-listed equity and equity-linked securities of startups with less than two years of operational history or green field companies or emerging early-stage undertakings mainly involved in new products, services, technologies or intellectual property rights based activities or new business models. For operational eligibility, a local venture capital firm needs to have a paid-up capital of at least Tk5 crore. For a fully-owned subsidiary foreign venture capital firm, it needs to have a paid-up capital of at least Tk15 crore for application of registration, and for a partially-owned subsidiary foreign firm, the paid-up capital will be at least Tk10 crore. The applicant firm must have a minimum net worth of 75% of its total paid-up capital. About criteria on formation of an alternative investment fund, such fund size will be minimum Tk10 crore and subscription by the sponsor is not less than 10% of the fund provided that the sponsor will subscribe at least 20% of its total subscription to the fund before registration of the fund. India has more than 200 such types of companies after promulgation of rules and regulations in 1996. A large number of venture capital companies have been formed in Pakistan after proclaiming rules in 2001. In India, venture capital financing started in 1988 with the formation of Technology Development and Information Company of India Ltd. Grameen Fund is the pioneer of venture capital in the country. It launched its operation in mid-1990s although the organisation is no more funding the private companies as venture capital.