The Council of the European Union has on 21 March 2013 formally
approved the European Venture Capital Funds Regulation (EVCFR).
EVCFR is intended to enter into force on the same day as when the
Alternative Investment Fund Managers Directive shall be by latest
implemented on a national level, i.e. on 22 July 2013. By contrast
to AIFMD, EVCFR does not require any actions to be taken from local
legislators, being a directly applicable regulation in the EU
member states. The most recent version concerning venture capital funds and social entrepreneurship funds are available on
the European Commission's web pages.
EVCFR will affect the marketing of European venture capital and
so-called social entrepreneurship funds. The requirements set by
EVCFR to the fund managers relate e.g. to investment portfolio,
investment techniques and other undertakings of the fund. These
rules are, however, significantly lighter than the burdensome
regulation brought by the AIFM Directive and, most importantly, a
voluntary framework for managers that would not be required to be
licensed under the AIFM Directive. This framework comes with a EU
passport: fund managers may, after domestic registration process,
market the qualified funds covered by EVCFR in all EU member states
without a need to separately register and obtain approval from
market authorities of each of the relevant member state. Thus,
EVCFR will make the EU-wide marketing of qualified venture capital
and social entrepreneurship funds considerably less
cumbersome.
In a nutshell, a qualifying venture capital fund would, based on
EVCFR, be a collective investment undertaking (anything save for a
UCITS fund) which intends to invest directly at least 70 percent of
its aggregate capital contributions (after deduction of all
relevant costs) to companies which qualify as small and
medium-sized companies at the moment of investment. The definition
refers to companies that are unlisted, employ fewer than 250
persons and have either an annual turnover not exceeding EUR 50
million or annual balance sheet not exceeding EUR 43 million.
Further, EVCFR would not apply to funds covered by AIFMD.
The AIFMD (blue) and EVCFR (yellow) regulations may be roughly
illustrated as follows:
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.