Inter-institutional negotiations will begin this Thursday 11 May on the legislative proposal to revise the regulations of European legislation governing the activities of venture capital funds (EuVECA) and social entrepreneurship funds (EuSEF).
Questioned by EUROPE on Wednesday 10 May, Sirpa Pietikäinen (EPP, Finland), the European Parliament's rapporteur on this issue, said she hoped for "very constructive negotiations, and a very short and speedy outcome" before the end of the Maltese Presidency of the Council of the EU.
Just one hour of negotiation time has been earmarked for this first trialogue session, which aims to identify issues to be resolved at political level and to give a technical group a mandate for the others. The main agenda items include reinforcing the role of the European Securities and Markets Authority (ESMA) and the level of own funds to be held in order to carry out activities within the EU.
The Council's negotiating position, which was decided upon in mid-December 2016 (see EUROPE 11691), is relatively close to the Commission’s initial text. Readers may recall that the Commission presented this proposal in July 2016 in the framework of its Capital Markets Union (CMU) project (see EUROPE 11594). This aims, amongst other things, to give venture capital fund managers managing portfolios in excess of €500 million and falling within the scope of the directive on alternative investment funds (‘hedge funds’) access to the markets of the EuVECA and EuSEF funds. They will still be required to comply with the requirements of the directive and a number of provisions of the two regulations.
The initial points of consensus include a relaxed definition of SMEs in which funds must invest 70% of the capital paid in by their clients in order to obtain the European passport, as proposed by the Commission. The European Parliament and the Council also added flexibility over the maximum number of employees of an eligible SME, raising this from 250 to 499.
However, Parliament’s position, adopted at the end of March (see EUROPE 11752), tightens up the supervisory role of ESMA compared to the initial text. The MEPs proposed giving ESMA a “coordination and supervisory role” in the registration process, thereby allowing it to draw up regulatory technical standards to clarify the information to be provided and giving it the option to examine the national authorities’ registration process.
On this subject, the member states supported the Commission’s proposal, not including ESMA in the registration process in addition to the competent authority of the member state of origin.
On the levels of own funds, the European Parliament brought in a capital requirement for both types of fund at €30,000, compared to €50,000 as proposed by the Council, and agreed that own funds should represent at least one eighth of the previous year’s fixed costs, whilst the Council proposed one sixth.
In Pietikäinen's view, this will be the main point of disagreement during these negotiations – a point on which the European Parliament certainly intends "to fight", she told EUROPE. In Pietikäinen's view, it is important that the demands for own funds remain "as low as possible" because requirements that are too high would prevent actors from entering the market.
Finally, whilst the Commission and Council decided to steer clear of the highly political issue of the minimum threshold for each investor, which has been set at €100,000, the MEPs decided to reduce this figure to €50,000 for EuSEF funds.
Other matters will also be discussed, such as the examination of the management of the European passport, the definition of marketing and acquired rights. No agreement is expected from this first trialogue, but it may be possible at the next, scheduled for 30 May 2017. (Original version in French by Marion Fontana)