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The impact of law

Talks between EVCA and the EU to improve the environment for the private equity market in Europe may well bear fruit, but national governments and national venture capital associations are going to have to do their part, too, says SJ Berwin.

The European Private Equity and Venture Capital Association (EVCA) met with politicians from the European Union (EU) recently to discuss legislative priorities. EVCA wants action to ‘foster and expand growth in entrepreneurship and the development of successful businesses funded by private equity across Europe', and a healthy measure of agreement emerged from the discussions.

That was not particularly surprising: EVCA has been working closely with the EU over the past few years to develop strategies to facilitate ‘risk capital', including involvement with the European Commission's detailed ‘action plan' on the subject - which is now about half-way through implementation.

The European legal landscape is clearly important, and EVCA's policy priorities reflect the need for Europe's lawmakers to look at venture capital and private equity as an important method of financing and sustaining both growing and mature businesses. To foster that, all governments need to look at their tax and regulatory regimes and measure their impact on the sector.

Among the priorities identified by EVCA are capital gains tax rates and stock option rules, private equity fund structures, the EU's rules on ‘mergers' and pension fund regulation. These are diverse areas, but all can have an important impact and, in each case, the rules in many European countries are unhelpful. To take fund structures as an example, the myriad of rules and regulations across European countries will usually make complex fund structuring inevitable, and - as in many areas - complying with the rules and optimising the structure can be difficult and expensive.

There is no doubt that the European Commission has been, and will continue to be, involved in some important initiatives to improve matters, but a major problem is that much of the reform is required on a national - rather than a European - level, and the Commission can often only seek to persuade governments to take the necessary action. Progress at a European level is welcome, but is only one part of the solution. National governments must continue to examine ways of improving the environment at home if breakthroughs are to be made, and national private equity associations will play a key role in raising awareness.

This is an extract from a weekly bulletin produced by SJ Berwin providing an update of legal and tax developments that relevant to the European private equity community. If you would like to be added to their mailing list please send an e-mail to sjbnetworks@sjberwin.com

SJ Berwin is a pan-European law firm with a particular focus on private equity. It has offices in London, Frankfurt, Munich, Berlin, Madrid, Paris and Brussels. If you would like further information on our services to the private equity industry please contact Jonathan Blake or Simon Witney in our London office 020 7533 2222 or visit our website at www.sjberwin.com

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