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Agreement reached on European Venture Capital Funds Regulation without depositary requirement

29 June 2012

The European Private Equity and Venture Capital Association (EVCA) today welcomes the agreement reached under the Danish Presidency on the European Venture Capital Funds Regulation. The Regulation, originally proposed by the European Commission in December 2011, will harmonise fundraising rules for the venture capital industry across the EU 27, and give venture capital funds access to a pan-European marketing passport, thereby benefiting from the European single market.

Dörte Höppner, Secretary General, EVCA, comments: “The EVCA welcomes the agreement on this important Regulation which will help venture capital funds to attract much-needed capital to the sector. The EVCA is pleased that legislators have recognised the need to protect venture capital from burdensome requirements such as a depositary, which were in fact designed for financial market traders. This Regulation will facilitate future fundraising opportunities because it will allow those fund managers signing up to the Regulation to benefit from a European marketing passport, while gaining an international ‘stamp of quality’, which is attractive to institutional investors.”

Instead of a depositary requirement, an enhanced audit function will be required, to be confirmed in the manager’s Annual Report. In addition, contrary to what was originally proposed by the Parliament Rapporteur, there will be no restrictions on the age of the portfolio companies that can be included.

The EVCA is supportive of the policymakers’ efforts to improve the fundraising environment for venture capital, and in this spirit has been a constructive and engaged stakeholder since the start of the process, trying to make sure that the final Regulation best reflects the practical circumstances of Europe's venture capital providers. Please find here an Open Letter submitted previously to policymakers by over 180 VC EVCA members expressing their deep concern about the effect of the proposed depositary requirement.

The agreed text will now need to be officially adopted by the Council and the European Parliament, and will enter into force shortly thereafter. Being a Regulation, there will be no transposition into national law.

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