Registering as a EuVECA manager allows a firm to market qualifying venture capital funds throughout the EU to certain categories of investors under the EuVECA ‘label’ who are able to commit at least €100,000. Registration as a EuVECA manager is currently available only to managers that have assets under management below the €500 million thresholds in Article 3(2)(b) of AIFMD.
To use the EuVECA label for a fund, the manager must currently demonstrate that a high percentage of investments in the fund (70% of the capital received from investors) is invested in small and medium-sized enterprises.
A manager of this type of fund is classified as a small registered UK AIFM and can be registered with the FCA through a simplified registration process, details of which are located here.
Despite this seemingly attractive regime, EuVECA has seen a very low uptake. The EuVECA Regulations were introduced in 2013 to promote investment in qualifying funds supporting young and innovative companies. However, as of April 2016, there were only 70 EuVECA funds.
On 14 July 2016, the European Commission published a legislative proposal to amend the EuVECA Regulations (the Amending Regulations), which followed several stakeholder consultations carried out over the previous year and represented an attempt to identify the factors inhibiting the development of this regime. The proposal sought to increase investment in venture capital.
Small and growing companies and social enterprises will now enjoy better access to finance, thanks to EU rules agreed on 30th May by the European Parliament, the Council and the Commission. The revamped rules are part of the Commission’s drive to stimulate venture capital investments in the EU, a core objective of its Capital Markets Union (CMU) project.
The new rules will open up EuVECA to fund managers of all sizes and will allow a greater range of companies to benefit from EuVECA investment. It will also improve access by investors to small and growing businesses and social ventures. Finally, it will make the cross-border marketing of EuVECA funds less costly and will simplify registration processes.
Specifically, the agreement reached:
- extends the range of managers eligible to market and manage EuVECA funds to larger fund managers, i.e. those 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 EuVECA funds to invest in small mid-caps and SMEs listed on SME growth markets. This should increase the diversification possibilities offered by EuVECA funds and, therefore, make them more attractive to investors; and
- decreases the costs by explicitly prohibiting fees imposed by competent authorities of 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 now follows ordinary legislative procedure before the final endorsements by the European Parliament and the Council of the EU. Following the political agreement between co-legislators reached on 30 May 2017, the European Parliament gave its approval on the revised text on 14 September 2017, followed by the Council on 9 October 2017. The new EuVECA Regulation is expected to be published in the Official Journal very shortly.
How can Thistle help you?
Thistle will continue to keep this area under review and will issue further updates where necessary. For more information, email email@example.com or call 0207 436 0630.