The Council of Ministers has approved the Draft Law (PL) that regulates Private Equity Entities and Collective Investment Entities and modifying the Collective Investment Institutions Act (IIC). The main changes aim to favor direct sources of financing for companies, which are currently too dependent on bank credit. In venture capital, the objective is to redirect investment towards the financing of companies in the early stages of development and expansion, with new figures and more flexible financing formulas. In addition, the community directive of alternative investment fund managers is transposed, which implies new rules regarding structure, organization, risk management and remuneration for managers and a new marketing and cross-border management regime with a European passport.

Regarding risk capital, the figure of SME Risk Capital Entity (ECR-PYME) is created, which will allow the creation of debt funds aimed at financing SMEs. This figure will benefit from a more flexible financial regime, it will invest at least 70% of its assets in SMEs, being able to make use of both equity instruments and participative loans and debt to provide financing to these SMEs.

The regulation also makes the financial regime of risk capital entities more flexible, with various adjustments to facilitate the operations of these entities, such as a greater use of participative loans, more flexibility in calculating terms of compliance with the mandatory investment coefficient and the possibility that the Venture Capital Funds may periodically distribute results.

The PL approved today also transposes the Alternative Investment Fund Managers Directive that sets the harmonized framework of conditions for authorization, marketing, conduct and organization of the managers of these investment funds at European level. These funds correspond to venture capital entities, closed-ended collective investment entities and non-harmonized collective investment institutions, such as free investment IICs (“hegde funds”) or real estate IICs.

Among the main innovations stands out the streamlining and reduction of administrative burdens in the venture capital entities regime, since the authorization regime is maintained exclusively for their managers. For their part, private equity and closed-ended collective investment entities will be subject to a simpler system of simple registration with the CNMV. And on the other hand, regarding management companies, although they are subject to a strict authorization regime, certain charges are waived in the case of those that do not market to retailers and do not exceed a certain threshold of volume of assets managed (100M € or € 500M depending on whether the funds are leveraged or not).

Requirements are established for all management companies regarding their structure and organization to guarantee control of risks, liquidity and conflicts of interest. This includes the requirement to comply with a remuneration policy that avoids taking excessive risks. The remuneration policy must be compatible with the business strategy, it will be approved by the management body responsible for its application and it will be periodically evaluated. Guidelines for variable remuneration are also established, so that at least 50% of it is received in the form of participations of managed institutions or similar property interests and the deferral of at least 40% is established.

The marketing of ECR ​​is limited to eligible investors, professional investors and retailers as long as they agree to invest at least € 100,000 and declare in writing that they are aware of the risks associated with the intended commitment. Lastly, it also includes the marketing and cross-border management of alternative investment funds managed by European and foreign management companies. This new regime is based on the existence of a passport for European funds by European managers authorized under the directive, thus promoting a genuine internal market for alternative investment funds.

Finally, the Law on the Regulation of Pension Plans and Funds is amended to comply with the transposition of the Directive. Specifically, the managers of alternative investment funds will be allowed to manage the investments of the pension funds, without prejudice to the fact that in the current draft amendment of the Regulations on pension plans and funds, the express reference to the managers of pension funds is included. alternative investment funds.

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