Amending Regulation makes EuVECA- and EuSEF-Funds more attractive to investors


The European Parliament and the Council have agreed on substantial amendments to the EuVECA- and EuSEF-Regulations. The revisions will take effect on March 1st, 2018 and are intended to make EuVECA- and EuSEF-Funds more attractive to investors.


The EuVECA-Regulation (EU No. 345/2013) aimed at giving venture capital investors an easier access to young and innovative companies (Start-ups). In accordance with their investment requirements, EuVECA-Funds invest at least 70 % of their capital in small and medium-sized enterprises (SMEs). Additionally, the EuSEF-Regulation (EU No. 346/2013) intended to create a platform for investments in companies that pursue special social objectives. However, market observation has shown that only a relatively small number of funds have been registered as EuVECA- or EuSEF-Funds to date.

Both regulations include a request to the Commission to regularly review the provisions. After having received a draft from the Commission regarding an amendment to the EuVECA- and EuSEF-Regulations on July 14th, 2016 (please click here), the European Parliament and the Council have agreed to substantially amend the regulations on October 25th, 2017. The amendments seek to simplify the cross-border marketing of EuVECA- and EuSEF-Funds and to reduce administrative expenses, consequently increasing the attractiveness of EuVECA- and EuSEF-Funds. The amended regulations will become effective on March 1st, 2018.

Substantial Improvements

The external management of EuVECA- und EuSEF-Funds will be significantly simplified. Managers whose managed assets exceed the previous threshold of EUR 500 million shall also be able to set-up EuVECA- and EuSEF-Funds. The threshold of EUR 500 million will therefore be removed. Furthermore, there will no longer be a need for double registrations. Managers who are already registered under the AIFM-Directive will not need to register separately as managers pursuant to the EuVECA-Regulation. Additionally, the time to market is reduced drastically by implementing strict maximum periods of two months with regard to new registrations and one month for notifications of changes.

Since many requirements will be less strict or waived, the number of qualifying portfolio undertakings for EuVECA-Funds will be extended significantly as well: Prior to the Amending Regulation, qualifying portfolio undertakings were only authorized to employ up to 249 persons. They will now be allowed to employ up to 499 persons. Furthermore, investments in SMEs that are listed on an SME growth market will be eligible. Such companies are characterized by an average market capitalization of less than EUR 200 million on the basis of end-year quotes for the previous three calendar years. Contrary to the legal situation at the moment, the requirements must only be fulfilled at the time of the initial investment, but not at the time of follow-up investments. The turnover limit of EUR 43 million per year and the maximum balance sheet total of EUR 50 million are no longer applicable.

Regarding EuSEF-Funds, the current requirements for target companies (providing goods and services to vulnerable, marginalized, disadvantaged or excluded persons) are replaced by the more general requirement to provide goods and services with a high social return.

The current requirement for managers to have “sufficient own funds” (i.e., regulatory capital) is further specified. An initial capital of EUR 50,000.00 will be a basic requirement. The own funds of a manager will have to amount to at least 1/8 of the fixed overheads incurred by the manager in the preceding calendar year or 1/8 of the fixed overheads expected in the business plan if the manager has not yet completed a calendar year of business. If the value of the qualifying venture capital funds managed by the manager exceeds EUR 250 million, an additional amount of own funds equal to 0,02 % of the amount by which the total value of the qualifying venture capital funds exceeds EUR 250 million will be required. If the manager provides a guarantee given by a credit institution or insurance undertaking, the aforementioned requirements regarding own funds can be waived in a corresponding amount up to 50%.

Other essential amendments are the prohibition to charge additional fees for the marketing of EuVECA- and EuSEF-Funds addressing the member states and the additional liability of managers for infringements of the EuVECA- and EuSEF-Regulations, including for any losses or damages resulting therefrom.

Need for further review

Apart from the amendments, the Amending Regulation includes a request to the Commission to further review the regulations. In the context of the next review of the regulations in four years, the Commission shall investigate whether it would be beneficial to create an additional voluntary option for retail investors through the use of feeder funds and to lower the minimum investment threshold, the latter especially with regard to the increasingly simple access of consumers to precarious and unregulated forms of investment such as crowdfunding. In comparison, EuVECA- and EuSEF-Funds are subject to regulation and supervision.The Commission shall further analyze the appropriateness of introducing a management passport for managers of EuVECA- and EuSEF-Funds. This would allow managers of a member state to manage EuVECA-Funds that were established in a different member state.

Impact on professional practice

The revisions will become effective on March 1st, 2018. The amendments regarding necessary own funds will not apply to managers whose EuVECA- or EuSEF-Funds have already been registered prior to that date. Investments in EuVECA- or EuSEF-Funds will potentially become more attractive to investors in the future, since they address a larger number of investment targets and investors. This should significantly increase the currently limited prevalence of these funds. In addition, the request to the Commission to continuously review the regulations gives reason to hope that EuVECA- and EuSEF-Funds will be strengthened even more.