The European institutions have been working on a Regulation that will amend the European Venture Capital Funds Regulation (EuVECA Regulation) and the European Social Entrepreneurship Funds Regulation (EuSEF Regulation), to make it easier for qualifying Alternative Investment Funds to invest in small and medium entreprises. The backstory, original draft text, and earlier European Presidency compromise texts are available here.

The European Presidency has just published its 3rd compromise text. The text is marked up to show how it’s changed from the original proposal. ALthough it’s not apparent from the published text, for those who follow these things, this version is different to the last version because:

  • at the end of recital (10), it explains why host Member States are prohibited from imposing charges on fund managers that want to market their funds into other European Member States (“The prohibition is justified given no supervisory tasks are to be performed since [qualifying venture capital funds (VC Funds), and qualifying social entrepreneurship funds (SE Funds)] can only be marketed to professional and non-professional investors able to invest a minimum of EUR 100,000 and [who] state in writing they understand the risks of the investment“);
  • a new recital (11) has been added, which explains that “It is necessary to clarify that managers of [VC Funds] and [SE Funds] which are not authorized in accordance with [the Alternative Investment Fund Managers Directive (AIFMD)] may market such funds throughout the Union, but are not allowed to manage such funds cross-border“;
  • a new article 1(6b) has been added. (If made and brought into force in identical form) this will delete part of article 14 of the EuVECA Regulation, so that it’s no longer necessary for VC Fund managers that want to use the “EuVECA” designation to give their home regulator a list of the Member States where they’ve established, or in which they intend to establish, a VC Fund. A new article 2(6b) will have the same impact on the EuSEF Regulation, to the benefit of managers that want to use the “EuSEF” designation instead;
  • article 2(10) has been amended. (If made and brought into force in identical form) this will add a new paragraph to article 21 of the EuSEF Regulation, so that SE Fund managers will be required to “comply at all times with [the AIFMD]“. Those managers will also “be responsible for ensuring compliance with [EuSEF] Regulation and shall also be liable in accordance with [the AIMFD] for any infringements of [the EuSEF] Regulation. Those managers shall also be liable for losses or damages resulting from non-compliance with [the EuSEF] Regulation“. (The last version of the Presidency compromise text added an equivalent paragraph into the EuVECA Regulation, so this merely brings the EuSEF Regulation “into line”); and
  • article 3 has been amended, so that the proposed regulation, amending the EuVECA Regulation and the EuSEF Regulation, will enter into force on the 20th day following its publication in the Official Journal, and “shall apply as of its entry into force, with the exception of existing managers of [VC Funds] for which this Regulation shall apply from 18 months following its publication in the Official Journal…

More to follow, as we get it…