The European Commission presented on December 7, 2011 a proposal for a Regulation establishing uniform rules for the marketing of venture capital funds.
The new regulations will allow venture capital funds to raise capital more easily throughout Europe, to the benefit of business start-ups.
The proposal on venture capital establishes uniform rules governing the marketing of funds under the name of “funds of European venture capital.” The “fund of European venture capital” is defined by three essential requirements:
- It invests 70% of its subscribed capital by customers in SMEs;
- Provides financing to SMEs in the form of equity or quasi-equity (that is to say the “new capital”);
- It does not use leverage (that is to say that the capital it invests are not superior to capital invested by investors, so it is not debt).
All funds are managed under this name must follow the rules and uniform quality standards (including rules on investor information and operational requirements) when they raise capital across the EU .
“With these uniform rules, investors know exactly what they will get by investing in venture capital funds in Europe.”
The proposal also establishes a uniform approach regarding the categories of investors who are eligible to commit capital to fund European venture capital. Eligible investors are professional investors as defined in the 2004 Directive on markets in financial instruments and certain other investors traditional venture capital (such as wealthy individuals or business angels). Uniform rules on venture capital investors ensure that marketing can be adapted to the needs of these categories of investors.
The Regulation provides for all managers of venture capital funds eligible, a European passport entitling the market these funds to eligible investors across the EU. This is a significant improvement compared to the rules in the field of wealth management, including the directive on managers of alternative investment funds (AIFMD). Moreover, the rules of AIFMD establish a legal framework typically hedge funds and private equity funds and less suitable for fund traditional venture capital, which should benefit from a tailor-made regime.
The proposal on venture capital is transmitted to the European Parliament and the Council (Member States) for negotiation and adoption under the co-decision procedure.