A proposal for a Regulation on Venture Capital Funds

Source: Katarina Krempova¸ PKF Malta¸ 10 January 2012

The European venture capital industry is facing the following problems:

  • regulatory fragmentation and dispersion of the venture capital industry;
  • difficulty of potential ‘venture capital’ investors to invest in venture capital fund;
  • insufficient funds toward the financing of innovative start-up industries;
  • investor’s preference for private equity over venture capital investments;
  • inadequate size of a European venture capital fund – beneath the optimal size;
  • minor role of venture capital in the financing of SMEs.

The absence of an efficient venture capital sector has negative consequences for Europe’s global competitiveness.


The proposed Regulation is aimed at correcting these problems¸ as well as at supporting European venture capital market and introduces:

1.      Uniform requirements for the managers of collective investment that operate under the designation “European Venture Capital Fund” and uniform rules on the internal organisation of the managers¸ such as:

  • establishment in the European Union;
  • registration with the competent authority of their home Member State in accordance with Directive 2011/61/EC;
  • managing portfolios of qualifying venture capital funds;
  • acting with due skill¸ care and diligence;
  • applying appropriate policies and procedures for preventing malpractices;
  • possessing adequate knowledge and understanding of the qualifying portfolio undertakings;
  • avoiding¸ managing¸ monitoring and disclosing conflicts of interest;
  • maintaining and operating effective organisational and administrative arrangements;
  • using adequate and appropriate human and technical resources;
  • making available an annual financial report to the competent authority of the home Member State in relation to the qualifying venture capital fund;
  • keep investors informed in order to make their investment decision better;
  • and many others.

2.      Uniform rules for venture capital funds as a common framework of rules regarding the use of the designation “European Venture Capital Fund”¸ in particular: requirements to the investment portfolio¸ investment techniques and eligible undertakings.

  • The Regulation should qualify into which venture capital funds are to be permitted to invest¸ as well as the investment instruments to be used. Furthermore¸ Investors should be able to compare the investment propositions of different venture capital funds.

3.      Uniform rules on which categories of investors a qualifying venture capital fund may target.


The same rules in all of the Union will:

  • boost confidence of investors to invest in venture capital funds;
  • reduce regulatory complexity and the managers’ cost of compliance with often divergent national rules;
  • contribute to eliminate competitive distortions.

To read whole proposal click here

Source: European Commission