European funds for venture capital and social businesses regulations

Thursday 14 March 2013

March 12, 2013, the European parliament voted favourably on new regulations concerning funds for venture capital and social businesses

The new rules on European Venture Capital Funds and European Social Entrepreneurship Funds create a special EU passport for all operators that invest in start-up SME’s and social businesses.

Ever since the financial crisis of 2008, SME’s, especially those in the early stages of their development, have struggled to get access to the kind of finance they need to grow and prosper. In December 2011, the European Commission proposed two new Europe-wide funding schemes facilitating cross-border collection of working capital that benefits those private investment funds that specialise in SME’s and social business. The proposals provide a straightforward scheme: once a set of requirements is met, fund managers can market their funds across the EU, cutting through existing rules on 'private placements' that are different in every Member State. Two new fund labels were created, one for venture capital funds investing in unlisted SMEs (EuVECA), the other for funds investing in social businesses (EuSEF).

Under the new rules, fund managers will need to register with the competent authority in their home Member State, but then will be able to market their venture capital and social entrepreneurship funds throughout the whole of the EU. They can target either institutional investors or retail investors who are willing or able to invest more than EUR 100,000. The fund managers will not need to register and obtain marketing approval in each Member State.

The rules make sure that the funds focus at least 70% of the capital they raise on equity investments in unlisted SME's or on equity or debt support for social enterprises.

After the vote in the European Parliament, the Council is expected to adopt both Regulations. Both Regulations will then enter into force 20 days after their publication in the Official Journal of the European Union which is estimated to be before the summer. 
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