Brussels, 11/04/2002 (Agence Europe) - On Tuesday, the European Commission approved the British government's proposal to participate in raising 20 million British pounds (UKP) for the "Community Development Venture Fund". This fund was developed to help companies set up in deprived areas in the United Kingdom. To fulfil this objective, it will provide venture capital to company start-ups and SMEs in these areas.
The Community Development Venture Fund (CDVF) is above all, a private initiative, supported by the British government. Private investors will provide half of the funding. To help get things up-and-running, the British government intends to provide 50% of the capital (maximum of UKP 20 million). Part of this contribution will be provided on subordinated terms. The Community Venture Development Fund will be managed by Bridges Community Ventures Limited, a newly established company under private law, that will operate under the regulatory auspices of the Financial Services Authority. The fund manager will make fully commercial investment decisions within the constraints imposed by the Community's State aid rules. The UK authorities notified the Community Development Venture Fund on 29 August 2001. The Commission examined the scheme on the basis of its Communication on State aid and risk capital. It considered that the UK Government's investment in the Fund constituted State aid in the sense of Article 87(1) EC, because it is made on terms which were less favourable than those that are available to the private investors in the Fund. At the same time, it is clear that the Fund will focus on areas of market failure (provision of limited amounts of equity finance to starters and small and medium-sized companies in disadvantaged areas only). In addition, investment decisions will be taken by professional fund managers and will be profit-driven. Finally, the terms of subordination of the capital provided by the Government have been market tested to ensure that the distortion of competition between investors and investment funds is minimised. The Commission therefore considers that the aid granted to the Fund will not adversely affect trading conditions to an extent contrary to the common interest and has decided to not to raise any objections to the CDVF.