The European Parliament has adopted proposals for amendment of the European Venture Capital Funds Regulation (EU) No 345/2013 (“EuVECA”).
EuVECA was introduced in July 2013 as part of the Capital Markets Union Action Plan. The goal was to increase the supply of capital to venture businesses. The initiative was not deemed a success, and following a late 2016 review, the EU council has proposed a number of amendments.
The most important amendments are:
- All AIF-managers authorised under national legislation implementing the AIFM Directive are eligible to establish, manage and market EuVECA-funds.
- The range of companies that EuVECA-funds can invest in – qualifying portfolio undertakings – is widened to include unlisted companies with up to 499 employees.
- Both internally managed EuVECA-funds and external managers of EuVECA-funds shall have an initial capital of EUR 50 000.
- Managers of EuVECA-funds shall have sufficient own funds, which at all times shall amount to at least 1/8 of the fixed overheads incurred by the manager in the preceding year. Where the manager has not completed a year’s business, the requirement shall amount to 1/8 of the fixed overheads expected in its business plan.
- Where the value of the EuVECA-funds managed by the manager exceeds EUR 250 million, the manager shall provide an additional amount of own funds equal to 0.02% of the amount by which the total value of the EuVECA-funds exceeds EUR 250 million.
- Simplification of the registration process for application of the EUVECA label.
Besides the now quantitative capital requirements, it is worth noting that following the old regulation, EuVECA-funds could invest in unlisted small-medium enterprises (SMEs), defined as companies with fewer than 250 employees and with an annual turnover not exceeding EUR 50 million or an annual balance sheet total not exceeding EUR 43 million. After the amendment, ref. no 2 above, EuVECA-funds can invest in unlisted companies with fewer than 499 employees and SMEs listed on an SME growth market. SMEs are now defined as companies that had an average market capitalisation of less than EUR 200 000 000 on the basis of end-year quotes for the previous three calendar years.
Note that the proposals must be adopted by the EU Council before they can enter into force. The revised rules will enter into force on the twentieth day following that of their publication in the Official Journal of the EU, and the rules will then apply in all EU member states three months after publication. As of this date, the EU Council has not adopted the amendments.
Link to EU’s press release here.
Stockholm, November 15, 2017