EuVECA and EuSEF amended: another opportunity to succeed?

Competition and Market Regulation Update

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On 14 September the European Parliament approved a revised version of the so-called EuVECA and EuSEF regulations.

The Regulations no. 345/2013 on European venture capital funds (EuVECA) and no. 346/2013 on European social entrepreneurship funds (EuSEF) initially came into force in July 2013. The aim of the EU legislators, following the adoption of the AIFM Directive, was to provide a common EU framework for market participants to benefit from a marketing passport under the EuVECA and EuSEF labels without having to meet all requirements introduced by the AIFM Directive.

The purpose of these Regulations are, with respect to the EuVECA label, to enhance the growth and innovation of small and medium-sized enterprises (SMEs) in the EU and with respect to the EuSEF label to support companies with the explicit aim to have a positive social impact and address social objectives, rather than only maximizing profit. With objectives as important as these, these labels were meant to represent important tools in achieving the goals set for the Europe 2020 strategy adopted in 2010. Over the last four years, only a comparatively small number of alternative investment funds were, however, established under these labels (127 EuVECA funds and 7 EuSEF funds).

Given this reduced interest by the market players, the European Commission started a review process of both Regulations which has brought us today to the revised Regulations, which now address most of the issues raised by stakeholders during the consultation process, thus providing greater flexibility and reducing the costs for fund managers.

The amendments of the Regulations intend to bring the following improvements:

  • The extension of the range of managers that can market and manage EuVECA and EuSEF funds to fully authorized AIFMs
  • The possibility for EuVECA funds to invest in small mid-caps and small and medium-sized enterprises listed on SME growth markets
  • The prohibition of certain fees imposed by authorities of host Member States
  • The simplification of the registration process and determination of the minimum capital required (€50,000) to become an EuVECA or EuSEF manager

Our DLA Piper Luxembourg team, who advised the first-ever Luxembourg based EuVECA manager on its registration with the Luxembourg regulator, will be happy to provide you with more details on this topic.