European venture capital funds

 

SUMMARY OF:

Regulation (EU) No 345/2013 on European venture capital funds

WHAT IS THE AIM OF THE REGULATION?

It aims to boost the growth and innovation of companies in the EU, including small- and medium-sized enterprises (SMEs).

It introduces a European Venture Capital Funds label, also known as EuVECA, and measures to allow managers to set up and market their funds across the EU using a single set of rules. This single rulebook will permit investors to know exactly what they can expect when investing in EuVECA.

It will also enable venture capital funds to be better positioned to attract more capital commitments and expand.

KEY POINTS

The average EU venture capital fund size is circa €60 million, whereas a similar US fund has more than double that. By enabling these EU funds to grow, it should be possible to boost capital contributions to individual companies and enhance their investment impact.

The regulation aims to boost funds so that they become larger, to adopt a more diversified investment strategy, so that they can specialise in sectors such as IT, biotechnology and healthcare. This should result in European companies becoming more competitive worldwide.

EuVECA label

To register for the EuVECA label and market their funds across the EU, managers of venture capital funds must set up a fund that:

The regulation sets out uniform quality criteria for managers of qualifying venture capital funds that wish to use the EuVECA label. These requirements cover everything from the way they organise and conduct themselves to the manner in which they inform investors about their activities and investment policies.

These managers must also register in the country where the fund is established and provide annual reports. The country where these funds are located is obliged to ensure all the regulation’s rules are respected.

As investing in venture capital funds can be risky, the regulation defines who can invest in EuVECA: professional investors and certain other categories such as high net worth individuals.

Regulation (EU) 2017/1991 amends Regulation (EU) No 345/2013 on European venture capital funds and its sister-regulation (Regulation (EU) No 346/2013) on European social entrepreneurship funds (EuSEF), extending the use of the designations ‘EuVECA’ and ‘EuSEF’ to managers of collective investment undertakings* authorised under Article 6 of Directive 2011/61/EU. It also expands the range of eligible companies, and decreases the costs associated with marketing the funds across the EU.

FROM WHEN DOES THE REGULATION APPLY?

It has applied since 22 July 2013 except for Article 9(5), concerning conflicts of interest, which has applied since 15 May 2013. Regulation (EU) 2017/1991, amending Regulation (EU) No 345/2013, has applied since1 March 2018.

BACKGROUND

The EU’s economic growth is largely dependent on its 23 million SMEs, which have also provided 80% of all new jobs in recent years. As traditional bank loans become harder to access, many SMEs now turn to venture capitalists to fund their research, product development or enter new markets.

For more information, see:

KEY TERMS

Collective investment undertakings: investment vehicles that pool investors’ capital and invest that capital collectively through a portfolio of financial instruments such as stocks, bonds and other securities.

MAIN DOCUMENT

Regulation (EU) No 345/2013 of the European Parliament and of the Council of 17 April 2013 on European venture capital funds (OJ L 115, 25.4.2013, pp. 1-17)

Successive amendments to Regulation (EU) No 345/2013 have been incorporated in the original text. This consolidated version is of documentary value only.

RELATED DOCUMENTS

Regulation (EU) 2017/1991 of the European Parliament and of the Council of 25 October 2017 amending Regulation (EU) No 345/2013 on European venture capital funds and Regulation (EU) No 346/2013 on European social entrepreneurship funds (OJ L 293, 10.11.2017, pp. 1-18)

Regulation (EU) No 346/2013 of the European Parliament and of the Council of 17 April 2013 on European social entrepreneurship funds (OJ L 115, 25.4.2013, pp. 18-38)

Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 (OJ L 174, 1.7.2011, pp. 1-73)

See consolidated version.

last update 28.02.2018