COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) No 345/2013 on European venture capital funds and Regulation (EU) No 346/2013 on European social entrepreneurship funds
Date: 2016-07-14
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: action programme, capital market, economic growth, entrepreneurship, fund (EU), investment aid, investment company, investment policy, small and medium-sized enterprises, venture capital

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 14.7.2016  SWD(2016) 229 final   COMMISSION STAFF WORKING DOCUMENT  EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT  Accompanying the document Proposal for a  REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL  amending Regulation (EU) No 345/2013 on European venture capital funds and Regulation (EU) No 346/2013 on European social entrepreneurship funds {COM(2016) 461 final} {SWD(2016) 228 final}  
 
 
Impact assessment on Proposal for a Regulation amending Regulation (EU) No 345/2013 on European venture 
capital funds (EuVECA) and Regulation 346/2013 on European social entrepreneurship funds (EuSEF). 

Executive Summary Sheet 

Why? What is the problem being addressed?  

A. Need for action 

The EuVECA and  EuSEF Regulations  introduced a “European  Venture  Capital Fund” and a “European  Social 
Entrepreneurship  Fund”  label  respectively  that  EuVECA  and  EuSEF  funds  supporting  young  and  innovative 
companies  or  enterprises  with  the  intention  of  generating  positive  social  impact  are  permitted  to  use.  The 
Regulations  enable  these  funds  to  be  marketed  cross-border  without  additional  barriers  in  order  to  meet  their 
investment needs. The review of the EuVECA and EuSEF Regulations is closely linked to the Capital Markets 
Union  (CMU)  objectives  focusing  on  facilitating  SME  financing,  diversifying  sources  of  financing  and 
strengthening  cross-border  capital  flows.  It  is  also  linked  to  the  first  and  second  pillars  of  the  Investment  Plan 
which  concentrate  on  ensuring  additional  EU  funding  to  SMEs,  equity  financial  instruments  under  the 
Programme  for  the  Competitiveness  of  Enterprises and  SMEs  (COSME),  as  well  as  under  Horizon  2020.  The 
Regulations are consistent with other CMU actions, such as the Commission's plan, together with the European 
Investment Fund, to sponsor a pan-European venture capital fund of funds which would invest in a combination 
of early, later and expansion stage venture capital funds.  

The IA Report builds on the findings of a review, the latter originally linked to the REFIT programme. 

What is this initiative expected to achieve?  

The  proposed  measures  should  increase  investments  into  venture  capital  and  social  enterprises  via  EuVECA 
and EuSEF funds through (i) removing limitations on larger managers managing EuVECA and EuSEF funds and 
dual registration requirements, (ii) decreasing costs for EuVECA and EuSEF funds, (iii) broadening the range of 
eligible assets EuVECA funds may invest in. 

What is the value added of action at the EU level?  

The amended EuVECA and EuSEF Regulations will render the two specialised funds more attractive and, thus, 
eliminate the need to research 28 Member States' regimes, reduce costs, and realise economies of scale. The 
modified  rules  will  further  unblock  the  flow  of  capital,  leading  to  increased  confidence  in  cross-border 
investments and to better functioning of the internal market. The necessity of EU action is based on the fact that 
Member  States  have  no  means  to  individually  overhaul  weaknesses  of  the  currently  applicable  EuVECA  and 
EuSEF  Regulations.  Actions  by  Member  States  alone  could  only  target  rules  outside  both  Regulations  and 
would  be  limited  to  what  would  be  allowed  under  the  Alternative  Investment  Fund  Managers  Directive 
2011/61/EU.  

B. Solutions 

What  legislative  and  non-legislative  policy  options  have  been  considered?  Is  there  a  preferred 
choice or not? Why?  

In order to achieve the desired objectives, the following is proposed: 

 

 

 

to  increase  the  number  of  EuVECA  and  EuSEF  managers,  funds,  and  assets  under  management 
through opening up the management of EuVECA and EuSEF funds to large asset managers, i.e. those 
authorised under the Alternative Investment Fund Managers Directive 2011/61/EU;  
to expand EuVECA eligible assets beyond the current SME definition (unlisted companies with less than 
250 employees + annual turnover less than €50 million or annual balance sheet less than €43 million) by 
adding (a) small mid-caps (i.e. non-SMEs up to 499 employees), as targeted by EU programs managed 
by the European Investment Fund, (b) SMEs listed on SME growth markets, as defined in the Markets in 
Financial Instruments Directive II 2014/65/EU, and (c) to allow follow-on investment; 
to decrease costs in determining  managers' own funds, explicitly prohibiting fees imposed by competent 
authorities of host Member States and simplifying registration processes. 

Who supports which option?  

2 

 
 
 
 
 
 
 
 
In  the  consultation  on  the  review  of  the  EuVECA  and  EuSEF  Regulations  respondents,  including  Member 
States,  very  strongly  supported  allowing  large  managers  authorised  under  the  Alternative  Investment  Fund 
Managers  Directive  2011/61/EU  to  manage  and  market  EuVECA  and  EuSEF  funds.  The  consultation  also 
received  criticism  of  the  definition  of  EuVECA  eligible  assets  which  was  deemed  to  be  too  restrictive. 
Respondents to the consultation noted out that several Member States have not taken into account the size of 
the  EuVECA  and  EuSEF  managers  when  interpreting  and  applying  the  EuVECA  and  EuSEF  Regulations,  in 
particular  as  they  charge  fees,  impose  additional  requirements  or  impose  the  same  level  of  requirements  as 
foreseen for large managers authorised under the Alternative Investment Fund Managers Directive 2011/61/EU. 

What are the benefits of the preferred option (if any, otherwise main ones)?  

C. Impacts of the preferred option 

The proposed modifications will strengthen a channel of financing through EuVECA and EuSEF funds for SMEs, 
including social businesses, so that they will be less dependent on banking sector constraints, and will thereby 
reduce  the  effect  of  banks  declining  credit  applications.  Large  managers  authorised  under  the  Alternative 
Investment  Fund  Managers  Directive  2011/61/EU  will  have  the  option  to  offer  a  full  range  of  products  to  their 
clients and as they rely on more economy of scale this in turn will be beneficial for investors. Opening-up of the 
two labels to large managers that manage larger portfolios could further foster the take-up of the labels and thus 
increase  their  recognition  among  investors  and  lead  to  larger  volumes  of  financing  available  to  the  economy. 
EuVECA  funds  may  play  a  crucial  role  in  the  development  of  the  SME  growth  market,  will  be  able  to  finance 
more entities, especially those that are more labour-intensive. To some extent, risks for investors will be reduced 
as more diversified investment opportunities will be available. Companies at later stages of development will also 
benefit from follow-on investment. 

What are the costs of the preferred option (if any, otherwise main ones)?  

There  should  be  no  relevant  social  and  economic  cost,  in  fact,  the  preferred  option  will  reduce  the  costs  for 
stakeholders using these two fund frameworks. Nothing suggests that the proposed policy options will have any 
direct or indirect impacts on environmental issues. 

How will businesses, SMEs and micro-enterprises be affected?  

The  modified  Regulations  will  improve  access  for  small  companies,  including  social  businesses,  to  capital  for 
growth. These entities will have more alternative sources of capital to draw on. They will be able to select from a 
larger  pool  of  competing  and  highly  specialised  EuVECA  and  EuSEF  funds  with  economies  of  scale;  funds 
which  will  therefore  be  more  cost  effective.  Greater  domestic  and  cross-border  competition  will  result  in  more 
value-added  support  for  the  commercial  development  of  the  funded  target  companies  and  will  increase  the 
innovation capacity that these entities can build on. 

Will there be significant impacts on national budgets and administrations?  

No. The proposed improvements should not trigger relevant costs for national budgets and administrations. To 
the contrary, competent national authorities should benefit from the clarifications. 

Will there be other significant impacts?  

No. 

When will the policy be reviewed?  

D. Follow up 

A  review  clause  will  be  proposed  to  determine,  four  years  after  the  revised  rules  enter  into  application,  the 
extent to which the above objectives have been achieved. 

3