Venture Capital and Social Entrepreneurship Funds: European Label

The European Council has adopted (separate) regulations which will allow the managers of Venture Capital or Social Entrepreneurship collective investment undertakings (CIU) that are not UCITS to operate under an EU-wide passport.

The effect of the regulations is to set out uniform requirements and conditions for the managers of such CIU and covers areas such as marketing, eligible investments and techniques and investor eligibility.

Such managers must be established in the EU and manage qualifying portfolios (as defined in the respective regulations) whose total AuM do not exceed €500m. The latter is, of course, the exemption threshold in Article 3(2)(b) of the AIFMD below which a lighter touch AIFMD registration regime applies.

The regulations introduce the concept of funds using either the designation “European Venture Capital Fund” (EuVECA) or “European Social Entrepreneurship Fund” (EuSEF) as applicable.

Funds so designated can be marketed across the EU to professional investors and certain retail investors; host Member States will not be able to impose any additional requirements or administrative procedures and nor will they be able to require approval of the marketing.

The regulations will not be compulsory; those managers of CIUs that do not wish to use an available designation do not need to register with the regulator. In such cases existing national laws and EU regulations will continue to apply.

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