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EU to boost venture capital by loosening rules

Business
VIENNA — The European Union is bringing forward a review of venture capital rules by two years after their take-up fell short of expectations, analysing if conditions introduced in 2013 were too restrictive for investors.

VIENNA — The European Union is bringing forward a review of venture capital rules by two years after their take-up fell short of expectations, analysing if conditions introduced in 2013 were too restrictive for investors.

Bloomberg

The EU could make it easier for funds to get a “passport” allowing them to invest in early-stage companies across the 28-nation bloc, the European Commission in Brussels said yesterday. The EU’s executive arm is seeking views until January 6 on whether it should allow larger fund managers, more retail investors and more companies to qualify in the review.

“EU legislation has attempted to establish the regulatory conditions for a successful EU venture capital sector,” the commission said in comments kicking off a consultation on the changes.

“Changes to these regulations could enhance the effectiveness of the passports by, for example, allowing larger fund managers to establish and market EuVECA and EuSEF funds, reducing the investment threshold in order to attract more investors and expediting cross-border marketing and investment.”

The venture capital review is part of the EU’s capital markets union plan, intended to boost funding to companies and remove barriers to investment within the EU.

Jonathan Hill, the EU’s financial-services chief, also issued proposals on reviving Europe’s asset-backed debt market, measures on covered bonds and attracting investment in long-term investment projects — all part of the overarching action plan to strengthen EU capital markets.

The EU created the “passport” for funds investing in small, early-stage companies two years ago.

It allows them to invest in any other member state once they are established in one.

Thirty-four funds have registered for the label dubbed EuVECA. They aim to raise 1,3 billion euros ($1,5 billion) of capital, a third of the EU’s target of 4 billion euros, the commission said.

Only fund managers with less than 500 million euros in assets under management can currently use the EuVECA label, while bigger companies may fall under similar rules for alternative investment funds.

One possible revision would allow bigger companies to use the label for their venture capital funds.

Fund managers based outside the EU may also be allowed to use the label if they meet the requirements.

The commission is also thinking about lowering the threshold of 100 000 euros for retail investments in venture capital funds, according to the consultation, citing French rules for domestic funds setting the limit to 30 000 euros as an example.

Restrictions for the size of the companies that can receive investments, and for the ability to invest with credit, not only with equity, could also be considered.