Legal Alerts/26 Mar 2013

Legal Alert – European Venture Capital Fund Regulation Approved

The Council of the European Union has on 21 March 2013 formally approved the European Venture Capital Funds Regulation (EVCFR). EVCFR is intended to enter into force on the same day as when the Alternative Investment Fund Managers Directive shall be by latest implemented on a national level, i.e. on 22 July 2013. By contrast to AIFMD, EVCFR does not require any actions to be taken from local legislators, being a directly applicable regulation in the EU member states. The most recent version concerning venture capital funds and social entrepreneurship funds are available on the European Commission’s web pages.

EVCFR will affect the marketing of European venture capital and so-called social entrepreneurship funds. The requirements set by EVCFR to the fund managers relate e.g. to investment portfolio, investment techniques and other undertakings of the fund. These rules are, however, significantly lighter than the burdensome regulation brought by the AIFM Directive and, most importantly, a voluntary framework for managers that would not be required to be licensed under the AIFM Directive. This framework comes with a EU passport: fund managers may, after domestic registration process, market the qualified funds covered by EVCFR in all EU member states without a need to separately register and obtain approval from market authorities of each of the relevant member state. Thus, EVCFR will make the EU-wide marketing of qualified venture capital and social entrepreneurship funds considerably less cumbersome.

In a nutshell, a qualifying venture capital fund would, based on EVCFR, be a collective investment undertaking (anything save for a UCITS fund) which intends to invest directly at least 70 percent of its aggregate capital contributions (after deduction of all relevant costs) to companies which qualify as small and medium-sized companies at the moment of investment. The definition refers to companies that are unlisted, employ fewer than 250 persons and have either an annual turnover not exceeding EUR 50 million or annual balance sheet not exceeding EUR 43 million. Further, EVCFR would not apply to funds covered by AIFMD.

The AIFMD (blue) and EVCFR (yellow) regulations may be roughly illustrated as follows:

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Additional information

Jyrki Tähtinen

Senior Partner


Paulus Hidén



Johannes Piha