In December 2011, in order to fight the effects of the current crisis, the European Commission presented a proposal to set uniform rules for the marketing of venture capital funds.
The new regulation – presented under the EU Action Plan – intends to make it easier for venture capitalists to raise funds across Europe through a uniform and simpler approach: once a common set of requirements is met, all qualifying fund managers can raise capital under the designation “European Venture Capital Fund” across the EU, without being constrained to meet different requirements for operating in every Member State.
The new rules will provide all managers of qualifying venture capital funds with a European marketing passport allowing access to eligible investors across the EU.
According to the Commission, by introducing a single rulebook, the funds will have the opportunity to attract more capital commitments and become bigger, which could mean: a) more capital for individual companies; b) fund specialization in particular sectors such as IT, biotechnology and health care.
The EC proposal wants to introduce a uniform “single rule book” governing the marketing of any investment vehicle under the designation “European Venture Capital Fund”, which is defined by three fundamental requirements:
1) Investing 70% of the capital committed by its sponsors in SMEs;
2) Providing equity or quasi-equity finance to these SMEs; and
3) Not using leverage (it does not invest more capital than that committed by investors, so it is not indebted).
The proposal is now passing to the European Parliament and the Council for negotiation and adoption under the co-decision procedure.
European Commission Enterprise and Industry
Rapid EU: New EU fundraising rules: boosting venture capital for SMEs and easing access to credit
Rapid EU: Commission proposal on venture capital for small- and medium-sized enterprises (SMEs) – Frequently Asked Questions
Updated on January 15/01/2012