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EuVECA - Eureka? - A study on Private Equity fundraising via new EU regulation

Sölvell, Christian LU (2016) LAGF03 20162
Department of Law
Faculty of Law
Abstract
During 2013 a new EU regulation on European Venture Capital Funds was carried out to simplify matters for AIFMs when marketing funds throughout the EU. Such AIFMs earlier had to comply with the full legislation of the AIFMD, which is an expensive process. Marketing in this context means the process of raising capital from professional and non-professional investors. The capital raised is subsequently invested in accordance with a set investing policy.

The regulation sets a standard of rules for an AIFM to qualify for using the EuVECA designation in its fund marketing. It also classifies certain investment undertakings as qualifying and others as non-qualifying. The fund shall at all times have a certain percentage of qualifying... (More)
During 2013 a new EU regulation on European Venture Capital Funds was carried out to simplify matters for AIFMs when marketing funds throughout the EU. Such AIFMs earlier had to comply with the full legislation of the AIFMD, which is an expensive process. Marketing in this context means the process of raising capital from professional and non-professional investors. The capital raised is subsequently invested in accordance with a set investing policy.

The regulation sets a standard of rules for an AIFM to qualify for using the EuVECA designation in its fund marketing. It also classifies certain investment undertakings as qualifying and others as non-qualifying. The fund shall at all times have a certain percentage of qualifying investments in its portfolio, which is expressly stated in the regulation.

The regulation has however not been applied to its intended extent. To date, there are only 45 registered EuVECA funds throughout the EU, six of which are based in Sweden. I have tried to identify what has caused these problems, and identified a great lack of knowledge. Both legal advisors and Venture Capitalists are largely unwitting of the regulation’s existence, and common practice is still to register AIFs under the full legislation of the AIFMD.

In addition to this, I have examined if the regulation has potentially been inadequately promulgated, the second of Fuller’s eight principles of morality of law. Finally, I have presented a few possible solutions to make the regulation applied more extensively. One way is to amend the wording of the regulation, explicitly allowing more AIFMs to use it, and classifying more investments as qualifying. Futhermore, the national implementations of the AIFMD could refer to the regulation in chapters relevant to registration and marketing of AIFs. I also believe the regulation would benefit from being communicated more efficiently to relevant people. Exactly through what channels of marketing this should be done is beyond the scope of my knowledge, but I am of the view that the regulation would be more widely applied if communicated directly to law firms and PE firms. (Less)
Abstract (Swedish)
År 2013 infördes en ny EU-förordning (345/2013) med avsikten att underlätta marknadsföring av riskkapitalfonder inom unionen. Tidigare behövde alternativa investeringsfonder (som lyder under LAIF och därmed AIFMD) registreras och marknadsföras under omfattande tillsyn och höga avgifter. Marknadsföring syftar i sammanhanget på kapitalresning från såväl professionella som icke-professionella investerare, och fondernas kapital ska sedan investeras i enlighet med en fastställd investeringspolicy.

Den nya förordningen ställer upp olika krav på hur en fondförvaltare kvalificerar sig för att få använda EuVECA-beteckningen vid marknadsföring av sin fond. Förordningen klassar vissa investeringar som kvalificerade och andra som okvalificerade.... (More)
År 2013 infördes en ny EU-förordning (345/2013) med avsikten att underlätta marknadsföring av riskkapitalfonder inom unionen. Tidigare behövde alternativa investeringsfonder (som lyder under LAIF och därmed AIFMD) registreras och marknadsföras under omfattande tillsyn och höga avgifter. Marknadsföring syftar i sammanhanget på kapitalresning från såväl professionella som icke-professionella investerare, och fondernas kapital ska sedan investeras i enlighet med en fastställd investeringspolicy.

Den nya förordningen ställer upp olika krav på hur en fondförvaltare kvalificerar sig för att få använda EuVECA-beteckningen vid marknadsföring av sin fond. Förordningen klassar vissa investeringar som kvalificerade och andra som okvalificerade. Det ska vid var tid råda ett förhållande mellan kvalificerade och okvalificerade investeringar, vilket också framgår av artiklarna.

Problemet med förordningen är att den inte har tillämpats i särskilt hög grad. I skrivande stund finns endast 45 registrerade fonder i hela EU, varav sex är registrerade i Sverige. Jag har därför försökt identifiera vad dessa problem beror på, och kommit fram till att det råder en utbredd kunskapsbrist på området. Både advokater och riskkapitalister är i stor uträckning helt ovetande om förordningens existens, och branschpraxis är fortfarande att registrera AIFer under AIFMDs fulla registrerings- och redovisningskrav.

Utöver detta har jag undersökt om förordningen möjligen brister ur ett rättssäkerhetsperspektiv, där jag diskuterar Fullers åtta kriterier för att en lags eller rättssystems existens ska kunna hävdas. Särskilt det andra kriteriet om promulgation (bekantgörande genom offentligt anslag) har diskuterats.

Slutligen presenterar jag lösningsförslag på hur förordningen skulle kunna få större spridning. Man skulle kunna ändra lagtexten till att explicit omfatta fler typer av fondförvaltare och investeringar, samt hänvisa till förordningen i nationella implementeringar av AIFMD. Utöver detta tycker jag att förordningen bör kommuniceras bättre till de som berörs av den. Exakt genom vilka markandsföringskanaler detta skulle ske är bortom min vetskap, men att förordningen skulle få större spridning om den kommunicerades direkt till advokatbyråer och riskkapitalbolag är troligt. (Less)
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author
Sölvell, Christian LU
supervisor
organization
course
LAGF03 20162
year
type
M2 - Bachelor Degree
subject
language
English
id
8896689
date added to LUP
2017-02-13 20:31:38
date last changed
2017-02-13 20:31:38
@misc{8896689,
  abstract     = {During 2013 a new EU regulation on European Venture Capital Funds was carried out to simplify matters for AIFMs when marketing funds throughout the EU. Such AIFMs earlier had to comply with the full legislation of the AIFMD, which is an expensive process. Marketing in this context means the process of raising capital from professional and non-professional investors. The capital raised is subsequently invested in accordance with a set investing policy.

The regulation sets a standard of rules for an AIFM to qualify for using the EuVECA designation in its fund marketing. It also classifies certain investment undertakings as qualifying and others as non-qualifying. The fund shall at all times have a certain percentage of qualifying investments in its portfolio, which is expressly stated in the regulation.

The regulation has however not been applied to its intended extent. To date, there are only 45 registered EuVECA funds throughout the EU, six of which are based in Sweden. I have tried to identify what has caused these problems, and identified a great lack of knowledge. Both legal advisors and Venture Capitalists are largely unwitting of the regulation’s existence, and common practice is still to register AIFs under the full legislation of the AIFMD.

In addition to this, I have examined if the regulation has potentially been inadequately promulgated, the second of Fuller’s eight principles of morality of law. Finally, I have presented a few possible solutions to make the regulation applied more extensively. One way is to amend the wording of the regulation, explicitly allowing more AIFMs to use it, and classifying more investments as qualifying. Futhermore, the national implementations of the AIFMD could refer to the regulation in chapters relevant to registration and marketing of AIFs. I also believe the regulation would benefit from being communicated more efficiently to relevant people. Exactly through what channels of marketing this should be done is beyond the scope of my knowledge, but I am of the view that the regulation would be more widely applied if communicated directly to law firms and PE firms.},
  author       = {Sölvell, Christian},
  language     = {eng},
  note         = {Student Paper},
  title        = {EuVECA - Eureka? - A study on Private Equity fundraising via new EU regulation},
  year         = {2016},
}