AIFM Directive: new developments, or how to strangle early stage innovation

The European Commission is moving in the direction of pretending that venture and innovation are key to the future but in practice putting both investors and startups at an information and cost disadvantage.  The latest developments do not look good.

Here is a brief update from EVCA Chairman Richard Wilson:

  • Vote last Wednesday evening by JURI, the Legal Affairs Committee of the European Parliament, which is looking at (mainly) portfolio company disclosure issues around the AIFMD (based on the rapporteur’s draft, 300 individual MEP amendments, and “various compromises”)
  • Serious cause for concern, around ‘investor protection’ – related proposals, including no private equity exemption for independent evaluation, depositary and capital requirements. Such proposals impose cost with no discernible protection against PE fund-related risks, and this will disproportionately penalise smaller private equity and venture funds.
  • The threshold for portfolio companies to be exempted from disclosure requirements was voted at less than 50 employees and controlling influence at 10%, 20%, 30% or 50% of voting rights.  All qualifying companies would be obliged to disclose information on divestitures and information on the progress of their development plans.
  • The next milestone is the vote in ECON, scheduled for May 10th or 17th.  Ultimately, the outcome of the ECON Committee vote will form the basis of negotiations with the Council of Ministers and the Commission. The Council is scheduled to agree its position on the Directive at ECOFIN on either 18th May or 8th June.

Wilson says “over the next three weeks we will re-emphasize the destructive and unnecessary nature of these proposals, and their direct impact on access to finance for Europe’s companies and European innovation. We will be calling on your firms and portfolio companies to help us get this message across by way of real life examples.”

This is the last leg of a long process to agree big picture legislation for our industry. It’s going to hurt.  In my portfolio, ALL my companies right now would be subject to disclosure requirementsZoopla, Seatwave, DailyMotion, PriceMinister, IS, KDS, NTR Global.  Ouch.

Way to go.  How Europe lost its way, chapter 7456785.

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