The overhaul of the existing European Venture Capital Funds (EuVECA) regulations proposed in 2016 as part of the capital markets action plan has now been agreed.
The objective is to improve access to finance for small and growing companies and to promote the Investment Plan for Europe, an EU strategy to tackle the lack of finance that is holding back Europe’s potential to grow.
The agreement removes another barrier to venture investment at EU level, said Vice-President Valdis Dombrovskis, who is responsible for financial stability, financial services and the capital markets union. “The reforms we have agreed – expanding investment possibilities for funds, broadening the range of eligible managers and simplifying administration - will help investor capital reach the SMEs that need it.”
The agreement will open up European VC funds to fund managers of all sizes and allow a broader range of companies to benefit from VC investment. In addition, cross border marketing of VC funds will be less costly and registration processes will be simplified.
Specifically, the agreement:
- extends the range of managers eligible to market and manage European VC funds to larger fund managers with assets under management of more than €500 million. Large managers can provide economies of scale, passing benefits on to investors;
- expands the ability of European VC funds to invest in small mid-caps and SMEs listed on SME growth markets. This will diversify the portfolios of VC funds, making them more attractive to investors;
- decreases costs by explicitly prohibiting fees imposed by host member states where no supervisory activity is performed. It also simplifies the registration processes and determines the minimum capital necessary to become a manager.
The agreed text will now follow ordinary legislative procedure before the final endorsements by the European Parliament and the Council of the EU.
The European VC Funds regulation that set up new types of collective investment funds to make it easier and more attractive for investors to invest in unlisted SMEs came into force on 22 July 2013.
To speed progress towards capital markets union, the Commission decided to bring forward a review originally planned for July 2017. It launched a consultation on 30 September 2015 that identified a number of factors holding back the development of these funds, and the new rules reflect this.
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