A proposal for a Regulation on European Social Entrepreneurship Funds

Source:Katarina Krempova¸ PKF Malta¸ 10 January 2012

A proposal for a Regulation on European Social Entrepreneurship Funds (EuSEFs) is complementary to a proposal for a Regulation on Venture Capital Funds. They are independent from each other¸ but operate autonomously to achieve own goals.

While the Venture capital funds focus on providing equity finance for SMEs¸ EuSEFs focus is on sustainable or inclusive development and on tackling social challenges across EU. EuSEFs provide funding to social undertakings and are likely to have a greater positive social impact than investment in SMEs.

 

The proposed Regulation on “EuSEFs” is primarily aimed at:

  • supporting the market for social businesses by improving the effectiveness of fundraising by investment funds that target these businesses;
  • achieving social impacts;
  • creating a legislative framework tailored to needs of social undertakings¸ investors seeking to fund such undertakings¸ and the specialised investment funds in order to achieve a high level of clarity.

There are a lot of various legal forms of social undertakings¸ including such services as:

  • access to housing¸ healthcare¸ assistance for elderly or disabled persons¸ child care¸ access to employment and training as well as dependency management and other services with social objective.

 

In order to raise capital across the Union and to boost confidence of investors¸ the proposed Regulation on “EuSEFs” introduces uniform rules applicable to EuSEFs¸ including:

 1.      Uniform requirements for the managers of collective investment undertakings that operate under the designation “European Social Entrepreneurship Fund” with the aim of ensuring uniform conditions and preventing diverging national requirements. Therefore¸ managers of collective investment undertakings would need to follow the same rules in all of the Union.

 2.      Requirements to the investment portfolio¸ investment techniques¸ as well as eligible undertakings that a qualifying social entrepreneurship fund may target¸ for example:

 The Regulation should specify into which the EuSEFs are to be permitted to invest¸ and the investment instruments to be used.

  • In order to achieve clarity regarding the types of instruments a EuSEF should use for such funding¸ this Regulation should lay down uniform rules on the eligible instruments to be used when making investments.
  • In order to ensure that EuSEFs have a distinct and identifiable profile¸ this Regulation should contain uniform rules on the composition of the portfolio and on the investment techniques which are permitted for such funds.
  • In order to ensure that EuSEFs are marketed to investors who have the knowledge¸ experience and capacity to take on the risks these funds carry¸ and in order to maintain investor confidence and trust in EuSEF¸ certain specific safeguards should be laid down.

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