European Venture Capital Funds

A Delegated Regulation Supplementing EuVECA Regulation Regarding Conflicts of Interest is Published in OJ

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On May 22, the Commission Delegated Regulation (EU) 2019/820 supplementing the European Venture Capital Funds (EuVECA) Regulation (345/2013) with regards to conflicts of interest EuVECAs was published in the Official Journal of the EU (OJ).

The Delegated Regulation, which was not objected to by the European Parliament on May 15, 2019 and presumably has not been rejected by the Council of the EU, sets out:

  • The types of conflict of interest for the purposes of Article 9(2) of the EuVECA Regulation.
  • Conflicts of interest policy requirements.
  • Procedures and measures to prevent, manage and monitor conflicts of interest.
  • Management of consequences of conflicts of interest.
  • Strategies for the exercise of voting rights to prevent conflicts of interest.
  • Disclosure of conflicts of interest.

The Delegated Regulation comes into force on June 11, 2019 and applies from December 11, 2019.

ESMA 2018 Regulatory Work Program

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On February 8, the European Securities and Markets Authority (“ESMA”) published its 2018 regulatory work program, which provides a detailed breakdown of the individual work streams outlined in the 2018 work program. The areas covered in the regulatory work program include the following initiatives: European Social Entrepreneurship Funds (EuSEF) Regulation, European Venture Capital Funds (EuVECA) Regulation, EMIR, MiFID II, Market Abuse Regulation (MAR), Securities Financing Transactions Regulation (SFTR) and Proposed Regulation establishing a framework for the recovery and resolution of central counterparties (CCPs).

The 2018 regulatory work program can be found here.

New Rules on Venture Capital Funds Adopted by the European Parliament

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New rules to facilitate innovative and socially beneficial companies accessing capital in the European Union were adopted by the European Parliament on September 14, 2017.

The European Parliament approved changes to Regulation (EU) no. 345/2013 on European venture capital funds (“EuVECA“) and Regulation (EU) no. 346/2013 European social entrepreneurship funds (“EuSEF“), aimed at attracting more investors for start-ups.

The changes are intended to reduce costs and barriers to entry for funds that lend to entrepreneurs and small to mid-sized enterprises. They include widening the range of managers eligible to create and manage EuVECA and EuSEF funds to those with assets under management of more than €500 million. Venture capital funds will also be able to invest in unlisted companies with up to 499 employees, allowing managers to diversify their funds. It is hoped that widening the range of eligible undertakings in which qualifying venture capital funds can invest will make them more appealing for investors and increase the flow of capital for businesses. The European Securities and Markets Authority has been charged with ensuring that funds are consistently registered and supervised across the EU.

The changes to the legislation are designed to make the cross-border marketing of both types of funds easier and less expensive as part of the EU’s efforts to create an integrated capital market, namely the Capital Markets Union.

The revised rules will enter into force 20 days after being published in the Official Journal of the European Union.

ESMA Publishes Q&A Paper on Regulation of European Venture Capital Funds and European Social Entrepreneurship Funds

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On March 26, the European Securities and Markets Authority (ESMA) published a Questions and Answers paper on the application of the European Social Entrepreneurship Funds (EuSEF) Regulation (Regulation 346/2013) and the European Venture Capital Funds Regulation (EuVECA) (Regulation 345/2013).

These regulations provide a common EU framework for managers of EuSEF and EuVECA that are registered with the competent authorities.

The paper seeks to answer questions relating to the practical application of the regulations, in order to encourage the adoption of common supervisory approaches among competent authorities.  Q&A Paper.

EU Publishes Regulation on European Venture Capital Funds

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On March 25, the EU’s Official Journal published the regulation on European venture capital funds (VCFs), which will become applicable throughout the EU on July 22, 2013.

The purpose of the regulation is to make it easier for venture capitalists to raise funds across Europe.  Supplementing the AIFMD regime, it creates a special “European VCF” designation for qualifying VCF funds, which will enable them to be marketed under that label across the EU, sidestepping member states’ national offering and marketing rules.  It is hoped the designation will also act as a quality brandmark.

To be a “qualifying VCF,” a fund must invest a minimum of 70% of its aggregate capital contributions and uncalled committed capital in SME equity or quasi-equity instruments and fulfill various conditions and obligations relating to its structure, investor base and management.  Regulation.

European Parliament Adopts at First Reading Proposed Regulations on European Venture Capital Funds and European Social Entrepreneurship Funds

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On March 12, the European Parliament adopted at first reading texts relating to the proposed Regulations on European Venture Capital Funds (EuVECAs) and European Social Entrepreneurship Funds (EuSEFs).

The Regulations are expected to make it easier for venture capitalists to attract more capital for start-up companies across Europe, by establishing a single rule book of requirements which will ensure that venture capitalists are no longer required to meet different standards in each member state.  The Regulations will also lay foundations for “European Social Entrepreneurship Funds”  (ESEFs)  which will allow investors to easily identify funds that are focused on investing in European social businesses.

The European Commission published a press release welcoming the adoption of the texts, stating that the Council is expected to adopt the Regulations on March 21, and that the Regulations will enter into force 20 days after publication in the Official Journal of the EU (OJ), which the Commission expects to be “before the summer”.