The legal framework for the creation of European Venture Capital (EuVECA) funds and managers has already been applicable for eight years, yet the demand from practitioners compared to other vehicles is still low. The review of rules which took place in 2017 was not a game changer.
According to data available on the ESMA website, as of March 2022, eight EuVECA managers and 15 EuVECA funds operate under the supervision of the CSSF.
In February 2022, the ALFI considerations on requirements applicable to Luxembourg EuVECA managers were published. This document was prepared by the ALFI Private Equity and Venture Capital Sub-committee and presents its members’ understanding of the requirements of the EuVECA Regulation, including how the latter is applied in Luxembourg. This way, interested parties are able to get a detailed overview of what one needs to know to set up a dedicated Luxembourg fund or manager.
The publication notably covers the following topics:
- Clarifications on (i) staff to be appointed in Luxembourg (number, tasks), (ii) the technical means at the disposition of the manager, and (iii) the address at which its office will be established;
- Organisation chart for the core functions (portfolio management, risk management, compliance, AML/KYC checks, valuation and distribution) and delegates used;
- Fit and proper documents related to the board members, as well as the persons in charge of the control functions;
- Business plan for the next three years and information on compliance with own funds requirements;
- Draft articles of association/incorporation of the manager;
- Full information on the shareholding structure of the manager (structure chart) up to the ultimate beneficial owners, including usual shareholder documents (in particular asset/liability statement and information on source of wealth in relation to physical persons, personally signed, plus passport copies);
- Details on the portfolio management process (deal sourcing, decision taking, permanent supervision, potentially information on due diligence over third parties);
- Details on the functioning of the risk management and compliance functions, AML/CFT
- Details on the marketing process and involved parties, as well as information on where marketing shall be performed;
- Details on the valuation function;
- Information on the EuVECA fund to be managed including the prospectus/articles of incorporation and information on the type of investors/ticket size.
It is hoped that the clarifications included in the ALFI considerations ensure more transparency on applicable rules and possible set-ups, which may result in a future take-up of EuVECA funds and managers in Luxembourg.
Susanne Weismüller, Senior Legal Adviser