Guidance on applying for authorisation to manage EuVECA funds

Background

Regulation (EU) No 345/2013 on European venture capital funds (the EuVECA Regulation) has been incorporated into Norwegian law through section 1a‑1 of the AIFM Act.

The Regulation governs the management and marketing of European venture capital funds (EuVECA) and constitutes a product‑specific regulatory framework for alternative investment funds. Only funds that meet the Regulation’s detailed requirements regarding portfolio composition and qualifying investments may use the designation “EuVECA”.

Finanstilsynet is responsible for the registration of managers of EuVECA funds and for processing applications to establish EuVECA funds. Finanstilsynet also supervises compliance with the provisions of the Regulation.

EuVECA in brief

The EuVECA framework is intended to facilitate increased access to capital for small and medium‑sized enterprises with growth and expansion potential. In order to achieve this objective, the EuVECA Regulation provides additional opportunities for registered AIFMs managing assets below the thresholds set out in section 1‑4 of the AIFM Act.

Registered AIFMs are exempt from most of the organisational and operational requirements of the AIFM Act. However, such managers are subject to significant limitations, as they do not have access to the internal market through the AIFMD passport. In Norway, they are also prohibited from marketing their funds to investors other than professional investors.

Under the EuVECA Regulation, registered AIFMs are granted the right to market and/or manage funds that qualify as EuVECA on a cross‑border basis within the EEA. EuVECA funds may be marketed to professional investors as well as to non-professional investors who commit to investing a minimum of EUR 100,000 and state in writing that they are aware of the risks associated with the envisaged commitment or investment.

At the same time, managers are subject to additional requirements. These includeF capital requirements applicable to the AIFM, requirements relating to the fitness, propriety and competence of the persons effectively conducting the business, and requirements concerning internal policies and procedures. In addition, the Regulation sets out detailed requirements regarding the information that managers of EuVECA funds must provide to investors prior to an investment decision. Such information must be fair, clear and not misleading.

Requirements for applications to use the designation “EuVECA”

General

Below is an overview of the minimum requirements applicable to an application for authorisation to use the designation “EuVECA”. In the assessment of individual applications, Finanstilsynet may request additional information and supplementary documentation.

References to sections refer to the AIFM Act, while references to articles refer to Regulation (EU) No 345/2013, as amended by Regulation (EU) 2017/1991.

Content of the application

The application must contain information demonstrating that the requirements applicable to both the manager and the fund are fulfilled, cf. Article 14 of the Regulation. The application must also disclose any circumstances relevant to the assessment of whether an authorisation should be granted.

The application must include:

  1. An overarching description of the manager’s business activities, specifying whether the manager acts as an external manager or whether the fund is internally managed.
  2. The identity of the persons who effectively conduct the business of the EuVECA manager, cf. Article 14(1)(a). For the person designated as responsible for portfolio management, information must be provided on relevant qualifications, professional experience and any other circumstances relevant to the assessment of whether the function can be performed in a sound and prudent manner. A completed Fit and Proper Assessment – Undertaking – Individual Form (see Circular: Vurdering av egnethetskrav) must be enclosed with the application. The same applies to the undertaking’s managing director.
  3. A calculation of the own funds requirement pursuant to Article 10. Own funds must at all times amount to the higher of EUR 50,000 and one eighth of the fixed overheads. For the calculation of fixed overheads, Finanstilsynet applies Circular 10/2014.
  4. Documentation of the EuVECA manager’s own funds, including:
    • The most recent audited and approved annual financial statements;
    • Interim financial statements, including profit and loss account and balance sheet, as at the end of the month preceding the submission of the application. Where the manager has been registered for less than three months, an opening balance sheet must be submitted instead;
    • An auditor's confirmation of the interim financial statements or opening balance sheet. Finanstilsynet assumes that the issuance of such confirmation requires a review engagement that at a minimum complies with the requirements of ISRE 2410;
    • A confirmation from an auditor, financial institution (bank), lawyer or accountant that the share capital has been paid into the company, where the paid‑in equity exceeds the amount shown in the abovementioned financial statements or opening balance sheet.
    • For the purpose of calculating own funds, Finanstilsynet applies the Regulation on the calculation of own funds for banks, credit institutions, finance companies, pension undertakings, central counterparties and investment firms. Own funds must be placed in liquid assets or assets that can readily be converted into cash and must not be invested in speculative positions.
  5. A budget for the first year of operations, clearly showing the development of income, costs and own funds throughout the year, that at all times enables an unambiguous assessment of compliance with capital requirements.
  6. A sufficiently detailed programme of operations describing the first year of activity, demonstrating compliance with requirements relating to:
    • Human and technical resources, including confirmation that resources will at all times be adequate;
    • The board of directors and senior management, including their respective roles.
  7. Adopted policies and procedures covering, at a minimum, compliance with the obligation to act honestly, fairly and with due skill, care and diligence (Article 7), delegation arrangements (Article 8), and the management of conflicts of interest (Article 9 and Regulation (EU) 2019/820).
  8. An information memorandum and/or other marketing material for the fund, together with a description of where the requirements set out in Article 13 of the Regulation are addressed in the marketing material. Pursuant to Article 13(1), such information must be presented in a clear and comprehensible manner. Pursuant to Article 13(2), the information must be fair, clear and not misleading.