General Regulation

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UCITS & investment funds AIF: Private equity

Private equity

Published on December 3, 2014

Private equity funds may be open either to non-professional (retail) investors or to professional investors.

Private equity funds open to non-professional investors

There are three types of private equity funds authorised by the AMF and open to non-professional investors, each of which has their own specific strategy:

Retail Private Equity Investment Funds (FCPR)
 A retail private equity investment fund is an investment fund comprising at least 50% of securities that are not admitted to trading on a market.

Retail Venture Capital Funds (FCPI)
A retail venture capital fund is a particular category of retail private equity investment fund. Its particular feature is that its assets comprise at least 60% of securities in companies that have their registered office in a Member State of the European Economic Area agreement, have at least 2,000 employees and are of an innovative nature.

Retail Local Investment Fund (FIP)
A retail local investment fund is a particular category of retail private equity investment fund. Its particular feature is that its assets comprise at least 60% of securities in companies conducting their activities mainly in establishments located in the geographical area chosen by the fund and limited to no more than three adjacent regions, and corresponding to the definition of small and medium enterprises (Annexe I to Regulation (EC) n°800/2008 of the Commission of 6 August 2008).

The AMF authorises private equity funds on the basis of the information in their regulatory documents (Key Investor Information Document – KIID – and fund rules) and in their advertising materials. It then monitors them throughout their lifetime. This authorisation is issued on the basis of an authorisation application file in accordance with the provisions of Instruction DOC-2011-22. The AMF also monitors these funds throughout their lifetime.

Subscription to private equity investment funds open to retail investors may entitle the subscriber to tax relief, notably from income and/or wealth tax. Authorisation by the AMF does not mean that subscribers will automatically benefit from the various tax relief measures presented by the management company. This will depend, among other things, on the product’s compliance with certain investment rules, on the period of time for which the investor holds their shares and on the individual situation of the subscriber.

Private equity funds open to professional investors

Professional private equity investment funds are funds in which the assets must comprise at least 50% of securities that are not admitted to trading on a market. Their particular feature is that they have streamlined investment rules and therefore fewer requirements to comply with in their management. They may take the form of a common fund or an open-ended investment company referred to as a “private equity company”. Subscription and acquisition of shares in professional private equity funds are reserved for the professional investors referred to in Article 423-49 of the AMF General Regulation.

Professional private equity funds are not authorised by the AMF, but simply declared to the regulator in the month following their creation, in accordance with the provisions of Instruction DOC-2012-06. However, the AMF does monitor any changes to them throughout their lifetime.

"EuVECA" funds
European Venture Capital Funds were created by Regulation (EU) n° 345/2013 of the European Parliament and the Council of 17 April 2013 for the purpose of promoting financing of unlisted companies.
"EuVECA" funds must have the intention of investing at least 70% of their aggregate capital contributions and uncalled committed capital in eligible assets.
This system allows AIF managers that are not authorised under the AIFM Directive to market venture capital funds within the European Union. “EuVECA” funds may only be marketed to professional clients and to non-professional clients who undertake to invest a minimum of €100,000.
Regulation n° 346/2013 of the European Parliament and the Council of 17 April 2013 introduced a similar system for European Social Entrepreneurship Funds ("EuSEF").

 

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