As we all know, one of the consequences of the crisis, which began with the collapse of Lehman Brothers, has been the enormous legal and regulatory activity that such an event has unleashed around the world.
Thus, at the level of the European Union, and as far as the venture capital sector is concerned, a series of rules have been approved that come to regulate a sector that was, for the most part, deregulated at European level.
I center this post in a single rule, without prejudice to the fact that others can be analyzed in later posts: la Directive 2011/61 / EU on Alternative Investment Fund Managers (AIFMD), transposed into Spanish law by Law 22/2014. This standard establishes the framework that all alternative fund managers who have more than € 500 million in assets under management (AUM) or € 100 million (if leveraged) must comply with.
The European Commission is now focused on preparing the work for the revision of the AIFMD Directive, which, although they should have started throughout this year, will not do so until 2018.
Although an in-depth revision of the standard is not expected, the key issues that are now being the subject of discussion, review and analysis are:
- El leverage concept, which continues to be a critical element. A number of national authorities clearly prefer a restrictive view of AIFMD's leverage provisions and maintain that debt incurred at the holding company level should be included in the fund-level leverage calculation. The industry defends that the debt of the holding companies should not be attributed to the fund.
- Some host Member States have been imposing a tasa, by fund or sub-fund, and additional requirements for managers when they try to use in said states the passports that have been granted to them by the regulators of their Member States of origin.
- Concepts of "Commercialization", "pre-commercialization" and reverse application (or "reverse solicitation"), in relation to which enormous disparities are observed between national legislations, as well as different approaches between the various regulatory authorities, which creates problems in practice.
- Principles of remuneration. The United Kingdom, Denmark, Germany, France, Slovakia, Finland and Sweden have communicated that they do not intend to comply with all or certain parts of the recommendations of the European Banking Association (ABE) regarding the “bonus cap”, this being a debate that remains open for the moment.
- Passports from third countries. AIFMD establishes a passport for the internal market for European managers and for the commercialization of European funds. For non-European managers and for European managers managing or trading non-European funds in the EU, the Directive establishes that a passport for third countries can be approved if certain requirements are met; for example, if the entity is licensed by a European regulator and fully complies with AIFMD. It does not appear that the European Commission will make any decisions on passports until the Brexit process is complete.
The Directive provides for the possibility of a phase-out of these national private placement schemes. Once the three (3) year transitional period has elapsed, a decision must be made by the European Commission as to whether or not parallel national regimes should be phased out.
If the third country passport is not designed in a way that works for the market, its introduction (combined with the possible elimination of national private placement regimes) could reduce market access for non-EU venture capital managers and companies. EU investor options. For this reason, it might be desirable to maintain national private placement regimes, even after the introduction of third-country passports.
In parallel, and as part of the EU Single Capital Market process, the European Commission is also thinking of proposing a horizontal initiative (Omnibus Directive), which covers both passports under the AIFMD and those of the UCITS Directive. The European Commission aims to make passports more effective and attractive and to strengthen the cross-border distribution of funds, both under the AIFMD Directive and under the UCITS Directive.
Julio Veloso Caro. Commercial Area Partner / Venture Capital. Broseta