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Invest Europe

Invest Europe

Invest Europe represents Europe's private equity, venture capital and infrastructure sectors and their investors.

Lobbying Activity

Meeting with Olivér Várhelyi (Commissioner) and

8 Jan 2026 · Strengthening of the EU healthcare systems and health biotech sector

Meeting with Arba Kokalari (Member of the European Parliament)

16 Dec 2025 · EUVeca - European Venture Capital Funds

Meeting with Barry Cowen (Member of the European Parliament, Committee chair)

2 Dec 2025 · Invest Europe’s High-Level Conference on Infrastructure Investment

Meeting with Xavier Coget (Cabinet of Executive Vice-President Henna Virkkunen)

2 Dec 2025 · Investment in technology in Europe

Meeting with Bruno Tobback (Member of the European Parliament) and Statkraft AS and

2 Dec 2025 · Investing into Europe’s Infrastructure Future

Meeting with Pascal Canfin (Member of the European Parliament)

2 Dec 2025 · Savings & Investments Union

Meeting with Philippe Thill (Cabinet of Commissioner Maria Luís Albuquerque) and Investment Company Institute and

28 Nov 2025 · Exchange on the development of Level 2 and 3 measures in the area of AML.

Invest Europe urges simpler EU funding to attract private investment

29 Oct 2025
Topic — Future EU budget for competitiveness and innovation funding post-2027.
Message — The organization requests strengthened EIF role with simplified procedures and better alignment with private market realities. They argue complex eligibility conditions have discouraged venture capital firms and call for regulatory action removing investment barriers.123
Why — This would make it easier to access EU funding and attract more institutional investor capital.45
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Meeting with Helene Bussieres (Head of Unit Financial Stability, Financial Services and Capital Markets Union)

13 Oct 2025 · Exchange of views on the SIU

Meeting with Sirpa Pietikäinen (Member of the European Parliament)

13 Oct 2025 · Investment in the EU

Meeting with Lauro Panella (Cabinet of Commissioner Maria Luís Albuquerque), Philippe Thill (Cabinet of Commissioner Maria Luís Albuquerque)

10 Oct 2025 · • Savings and Investment Union

Meeting with Henrik Dahl (Member of the European Parliament, Rapporteur)

24 Sept 2025 · Defence Omnibus

Meeting with Sirpa Pietikäinen (Member of the European Parliament)

18 Sept 2025 · Sustainable finance, Omnibus and supervision.

Invest Europe seeks easier insurance capital for private equity

5 Sept 2025
Topic — The consultation reviews technical rules for insurance capital requirements under the Solvency II framework.
Message — The association requests simplifying the checks insurers must perform on long-term investment funds. They recommend removing burdensome requirements for funds that do not use excessive debt.12
Why — This would allow private equity firms to attract more long-term capital from insurers.3
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Invest Europe urges EU to incentivise private climate resilience funding

3 Sept 2025
Topic — The initiative establishes a European framework for managing climate risks and improving economic resilience.
Message — They seek clear investment definitions and regulatory streamlining to unlock climate-resilient projects. They advocate for public finance to de-risk investments through incentives and blended instruments.12
Why — These measures would reduce financial risks and improve the commercial viability of infrastructure investments.3
Impact — Public taxpayers could bear higher financial risks by providing guarantees and subsidies to private firms.4
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Response to Mini omnibus for defence

29 Jul 2025

Private capital including private equity (PE), venture capital (VC), and infrastructure funds can play a critical role in strengthening Europe's defence industrial base. Invest Europe welcomes the Commissions intention to increase funding flexibility, support innovation, and facilitate the scaling of strategic capabilities through the amendments proposed under the mini omnibus for defence. Our members have a long-standing track record of successfully investing in companies active in defence, security, and dual-use technologies backing innovation, growth, and industrial resilience. They stand ready to continue using their expertise and capacity in the defence sector. Please find our response attached.
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Meeting with Stéphanie Yon-Courtin (Member of the European Parliament, Rapporteur)

17 Jul 2025 · Retail investment strategy

Meeting with Billy Kelleher (Member of the European Parliament)

16 Jul 2025 · Savings and Investment Union

Meeting with Thomas Skordas (Deputy Director-General Communications Networks, Content and Technology) and

8 Jul 2025 · Exchange of views on digital and infrastructure investments

Invest Europe Urges Including Private Equity in Savings Accounts

7 Jul 2025
Topic — The Commission is developing a blueprint for savings accounts to encourage retail investment.
Message — Invest Europe calls for long-term funds to be eligible assets in new European savings accounts. They suggest allowing "hard locks" on withdrawals and higher fee structures to accommodate the private equity business model.12
Why — This would open a massive new capital stream from retail savers to private equity funds.3
Impact — Retail investors lose the ability to easily withdraw funds and face significantly higher management fees.45
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Meeting with Martin Merlin (Director Financial Stability, Financial Services and Capital Markets Union)

24 Jun 2025 · Roundtable on the Savings and Investments Union and the role of private finance (VC/PE)

Invest Europe Urges Faster Biotech Commercialization and Investment Incentives

6 Jun 2025
Topic — The Biotech Act aims to create an environment that accelerates biotech commercialization and innovation.
Message — They request faster regulatory approvals and stronger intellectual property rights for innovation. The group calls for R&D tax incentives to attract long-term private capital. They support biotech regulatory sandboxes to test new models without full regulatory burdens.123
Why — These measures would de-risk R&D investments and increase confidence for private equity funds.45
Impact — Competing innovation hubs like the US may lose market share and global capital.67
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Meeting with Valdis Dombrovskis (Commissioner) and

3 Jun 2025 · Simplification

Meeting with Maria Luís Albuquerque (Commissioner) and

2 Jun 2025 · Information exchange

Invest Europe urges disclosure-based regime and simplified reporting rules

30 May 2025
Topic — This initiative reviews EU sustainable finance disclosure rules to simplify frameworks and prevent greenwashing.
Message — Invest Europe argues SFDR should remain a disclosure-based regime instead of a categorization system. They call for simplifying templates and removing entity-level reporting requirements for adverse impacts. They request grandfathering for closed-ended funds and more flexibility in governance requirements.123
Why — Simplifying templates and removing mandatory reporting would reduce compliance costs and administrative burdens.45
Impact — Transparency advocates lose access to standardized entity-level data on the sustainability impacts of firms.6
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Meeting with Timo Pesonen (Director-General Defence Industry and Space)

26 May 2025 · To follow up on current issues.

Meeting with Ekaterina Zaharieva (Commissioner) and

26 May 2025 · Exchange on European Startup and Scaleup Strategy

Meeting with Michalis Hadjipantela (Member of the European Parliament, Rapporteur)

14 May 2025 · Meeting

Meeting with Annalisa Corrado (Member of the European Parliament) and CAISSE DES DEPOTS

13 May 2025 · Investment for a sustainable and competitive EU

Meeting with Yannis Maniatis (Member of the European Parliament)

28 Apr 2025 · Introductory Meeting

Meeting with Kurt Vandenberghe (Director-General Climate Action)

24 Apr 2025 · engage on Invest Europe’s strategic priorities that align closely with DG CLIMA's objectives

Meeting with Michalis Hadjipantela (Member of the European Parliament, Rapporteur)

23 Apr 2025 · Meeting

Invest Europe urges EU to fix life sciences funding bottleneck

16 Apr 2025
Topic — A strategy to boost competitiveness and innovation within the European life sciences sector.
Message — The organization calls for restructuring the financial ecosystem to support early-stage venture capital. They request harmonized market access and a revised SME definition to unlock investment.123
Why — Proposed reforms would lower regulatory barriers and increase capital flow to investment funds.45
Impact — Public grant providers might lose relevance as the industry shifts toward tax-based incentives.6
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Meeting with Fernando Navarrete Rojas (Member of the European Parliament)

10 Apr 2025 · European Savings and Investments Union

Meeting with Reinis Pozņaks (Member of the European Parliament)

9 Apr 2025 · Introductory meeting

Response to Foreign Subsidies Guidelines

2 Apr 2025

Invest Europe would welcome the opportunity to highlight some key points on the operation of the 'investment fund' exemption (which limits the FSR reporting obligations to the funds involved in the transaction). As the Commission will be aware, Invest Europe and its member base welcome the exemption and the flexibility of the Commission in listening to the concerns of the industry when the reporting obligations were set. We are pleased that certain investment funds have been able to successfully rely on the scope of the exemption to narrow down their reporting obligations with resulting benefits from both an efficiency and deal-deliverability standpoint. However, and as noted by the Commission in its policy brief, a "notable trend" has been the relatively large number of transactions that involve an investment fund as a notifying party roughly one third of all cases. Given this high number of mandatory notifications, coupled with the non-problematic nature of such deals from an FSR perspective to date, we consider there to be scope to further reduce the significant reporting burden on firms seeking to avail themselves of the exemption without risking the overall aims of the Regulation. By way of example: Condition 1: The first condition of the reporting exemption (requiring the acquiring fund to have majority different investors from the firm's other funds under common management) has resulted in a burdensome process for firms seeking to rely on it. As an illustration, we understand that firms have been required to produce lists of individual LP contributions across different funds (rather than being able to rely, for example, on anonymised and aggregated lists). We would argue that there is scope for the Commission to accept a lighter touch approach in unproblematic cases. Condition 2: The experience of some (often larger) investment firms has been that the second condition of the exemption (requiring the acquiring fund to have non-existent or limited transactions with the firm's other funds under common management) has been conservatively applied. We understand that firms have needed to respond to detailed questions on transactions / arrangements between funds and, in some cases, on transactions / arrangements between portfolio companies. This has required firms to conduct burdensome internal inquiries across multiple funds and large numbers (even hundreds) of portfolio companies an exercise which has, in some cases, taken months to conduct. Whilst we consider there to be scope to broaden the exemption in the medium term (once the Commission has built up a bank of cases and experience in applying the FSR to the private equity and investment fund sectors), we consider that shorter term pragmatism over the amount of (detailed) information required of firms seeking to avail themselves of the exemption would be appropriate and more proportionate to the type of investments involved.
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Meeting with Cristina Dias (Cabinet of Commissioner Maria Luís Albuquerque)

31 Mar 2025 · Meeting to discuss financial markets developments

Invest Europe Urges Clarity on Simplified Taxonomy Reporting Rules

26 Mar 2025
Topic — Amendments to EU taxonomy delegated acts to simplify reporting and reduce costs for companies.
Message — Invest Europe supports proportionality but requests further clarification on reporting thresholds. They advocate for partial taxonomy alignment reporting to be available to all companies.12
Why — Broadening partial alignment helps firms demonstrate green transition progress without meeting all criteria.3
Impact — Asset managers face increased administrative burdens from detailed reporting on non-material assets.4
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Meeting with Andras Inotai (Acting Principal Adviser Research and Innovation)

17 Mar 2025 · Exchange of views on the upcoming EU Startups and Scaleups Strategy

Meeting with Aurore Lalucq (Member of the European Parliament, Rapporteur)

6 Mar 2025 · SIU

Meeting with Isabel Benjumea Benjumea (Member of the European Parliament)

6 Mar 2025 · SIU

Meeting with Maria Raffaella Assetta (Head of Unit Financial Stability, Financial Services and Capital Markets Union) and Insurance Europe and

4 Mar 2025 · EU financial services industry associations debrief on EU-UK Financial Regulatory Forum

Response to EU Start-up and Scale-up Strategy

3 Mar 2025

As the association representing the venture capital and growth fund managers investing in EU innovative companies Invest Europe we agree with the hurdles identified in the document. In this call for evidence, we will mostly focus on issues related to access to finance but we also share concerns expressed by start-ups and scale-ups on the burdens they face, in particular in terms of access to market, talent and infrastructure. Start-up visas, changes to insolvency law and the taxation of stock options are all potential areas of improvements in that regard. To effectively finance EU innovation through venture and growth funds, it is crucial to: - unlock EU institutional investments, whether insurers, bank and pension funds. This can be done by introducing targeted changes to the EU prudential regimes and by removing national barriers that continue to prevent these investors, in particular national pension schemes to commit capital to VC funds. EU passporting regimes should also be simplified and national barriers should be removed, potentially by allowing EU managers to choose voluntarily an EU supervisor. - unlock foreign investments, by adapting EU FDI rules to the realities of the VC investment model and by further harmonising national frameworks to make EU a more welcoming place to investors committing capital to different EU countries. - unlock sophisticated capital from high-net-worth individuals, by revising the definition of a professional investor in MIFID to ensure that experienced investors investing in long-term asset classes can do so without the complex and burdensome EU retail requirements unlock retail investments, by allowing EU citizens to invest indirectly in VC through insurance or pension wrappers. On the latter point, a long-term saving EU product and/or label should be created taking into consideration that: - most VC managers that are actively owning the companies they have invested in have a different cost structure that often does not fit standardised low-cost products. - too strict geographic criteria can act as a strong disincentive for the best players with an impact on returns and lower the ability of managers to diversify risks. Beyond access to finance, we also want to recall, from a company law perspective, the importance of revising the SME definition, whose current design disproportionately disadvantages companies backed by venture capital and private equity due to the application of the linked enterprise concept, which treats majority owned venture-backed companies as part of a broader economic group. More broadly, EU law should better acknowledge the features of long-term equity investments (concept of control). We support the concept of a 28th regime (EU Inc) and call the Commission to be extremely ambitious with this concept, at the risk of otherwise creating a regime of little interest to companies. Finally, with around 40% of the investment in VC coming from public sources (in particular the EIF), the role of public funding will remain crucial. We suggest, as was recently proposed, to streamline the budget support to innovation and make it more merit-based than rules-based.
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Response to Savings and Investments Union

25 Feb 2025

Insufficient financing is one of the key factors hindering the ability of EU businesses to grow and compete effectively on the global stage. Today, most EU citizens' savings are not being channeled into meaningful investments, either directly or indirectly, partly due to regulatory disincentives. To ensure a more competitive and resilient European economy, it is imperative to unlock capital from institutional investors, sophisticated investors, and retail clients. The European Savings & Investments Union offers a real opportunity to adapt once and for all the European regulatory framework for it to mobilize our own wealth to boost our own competitiveness while maintaining investor protection for EU citizens. This will require a fundamental strategic shift in EU financial law to facilitate investment in long-term, innovative, and illiquid asset classes that can drive sustainable growth and job creation. Not all players face the same challenges. Smaller venture capital firms will typically find it hard to establish themselves in markets where equity funding remains scarce - while larger players are competing at an international level with US managers for the most promising businesses. As a result, there should be a wide array of initiatives, both at national and EU level, to support the private capital ecosystem in its capacity as financing EU innovators, start-ups, scale-ups and European champions. In this paper, we highlight three ways to make full use of EU capital markets, to boost the finance side of the EU innovation ecosystem, and in particular the venture and growth capital funds, by: - unlocking EU institutional investments o Insurers: While the Solvency II review meets the requests of the industry, the European Commission should be careful that Delegated Acts are not preventing insurers to set up the category (no look-through should be required to exposures to non-substantially leveraged funds) o Banks: The CRD/CRR framework is disincentivising banks to make equity investments in long-term funds and the recent review has made this significantly worse. We call for a more appropriate regime, which does not consider long-term investments in innovation as speculative, for banks to again become investors in long-term assets through diversified funds o Pension funds: The IORP Directive currently states that investments of IORPs shall primarily be made in regulated markets although it specifies that Member States cannot prevent them from making long-term investments outside these markets (Art 19). We suggest that Article 19 should be modified to fully promote as opposed to avoid preventing - investments in long-term asset classes and investments in ELTIF and EuVECA funds. Meanwhile, in too many Member States there are a series of investment restrictions that effectively prevent pension funds to be invested into assets that could improve EU competitiveness o Fund management rules: While improvements have been made to the AIFMD passport, as well as voluntary vehicles EuVECA and ELTIF, more can be done to tackle the many barriers that fund managers continue to face when marketing cross-border. Changes to EuVECA are in particular warranted - unlocking sophisticated & retail investments Sophisticated investors: We suggest revising the definition of a professional investor in MIFID to ensure that experienced investors investing in long-term asset classes can do so without the complex and burdensome EU retail requirements Retail investors: Developing a long-term savings product that is effectively allowing investors to commit part of their capital to venture, growth and private equity funds could ensure every EU citizen can contribute naturally long-term capital to long-term EU innovation needs. A low maximum fee should be avoided, as it does not fit realities of long-term investments. - unlocking foreign investments, by modifying the FDI regimes appropriately
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Meeting with Alexandr Hobza (Cabinet of Executive Vice-President Stéphane Séjourné), Vincent Hurkens (Cabinet of Executive Vice-President Stéphane Séjourné)

11 Feb 2025 · Savings and Investments Union

Meeting with Sirpa Pietikäinen (Member of the European Parliament)

30 Jan 2025 · SIU and equity markets

Meeting with Markéta Gregorová (Member of the European Parliament, Shadow rapporteur)

28 Jan 2025 · Meeting on foreign investments in the Union

Meeting with Jörgen Warborn (Member of the European Parliament)

20 Jan 2025 · Venture capital

Meeting with Matthias Ecke (Member of the European Parliament)

15 Jan 2025 · Finanzpolitik / Wagniskapital

Meeting with Martin Merlin (Director Financial Stability, Financial Services and Capital Markets Union)

14 Jan 2025 · Building a venture and private equity ecosystem

Meeting with Merete Clausen (Director Internal Market, Industry, Entrepreneurship and SMEs)

14 Jan 2025 · Discussion on the Invest Europe latest publications

Meeting with Raphaël Glucksmann (Member of the European Parliament, Rapporteur)

10 Jan 2025 · Foreign Investments Screening Regulation

Meeting with Maria Raffaella Assetta (Head of Unit Financial Stability, Financial Services and Capital Markets Union) and Insurance Europe and

9 Jan 2025 · EU-UK Financial Regulatory Forum

Meeting with Ilhan Kyuchyuk (Member of the European Parliament)

12 Dec 2024 · Innovation in Europe and importance of IPs

Meeting with Gilles Boyer (Member of the European Parliament) and Insurance Europe and

3 Dec 2024 · CMU

Meeting with Stéphanie Yon-Courtin (Member of the European Parliament) and Insurance Europe and

3 Dec 2024 · Savings and Investments Union

Meeting with Axel Voss (Member of the European Parliament)

14 Oct 2024 · Corporate Sustainability Due Diligence

Meeting with Stéphanie Yon-Courtin (Member of the European Parliament)

11 Oct 2024 · Capital Markets Union /EU competitiveness

Meeting with Isabel Benjumea Benjumea (Member of the European Parliament)

1 Oct 2024 · Intergroup

Meeting with Lara Wolters (Member of the European Parliament)

17 Sept 2024 · Sustainable Finance

Meeting with Gilles Boyer (Member of the European Parliament)

17 Sept 2024 · Capital Markets Union

Invest Europe seeks specific exemptions from EU tax avoidance rules

11 Sept 2024
Topic — The European Commission is evaluating the effectiveness of the Anti-Tax Avoidance Directive.
Message — Invest Europe requests a flexible framework considering specificities of the private equity sector. They want independent fund investors excluded from being classified as associated enterprises. The group also seeks exceptions for investment vehicles to avoid adverse tax consequences.123
Why — The exemptions would protect investor returns and reduce administrative compliance burdens.45
Impact — Tax authorities could lose revenue if firms use debt to erode tax bases.6
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Response to Public country-by-country on corporate - template and electronic format

5 Sept 2024

Invest Europe, representing the Venture Capital and Private Equity industry, appreciates the opportunity to provide feedback on the European Commissions draft act regarding the standardization of the Country-by-Country Reporting (CbCR) framework and the potential adoption of XBRL as the mandatory format for submission. As an association deeply engaged with multinational enterprises (MNEs) and investment structures, we recognize the importance of transparency. While we welcome the opportunity to comment on this, we have significant concerns about the potential adoption of XBRL for CbCR filings, which we believe would disproportionately increase the compliance burden without providing commensurate benefits. Please refer to the attached letter for detailed feedback.
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Meeting with Billy Kelleher (Member of the European Parliament)

4 Sept 2024 · Capital Markets Union

Response to Evaluation of Administrative Cooperation in Direct Taxation

30 Jul 2024

On behalf of Invest Europe, we are pleased to provide our response to the Open Public Consultation on the evaluation of the Cooperation on direct taxation. Our response focuses mainly on the DAC 6 on four main points: 1) Reporting and notification: Mobilization of cost and resources DAC6 has created a set of reporting obligations for intermediaries as well as taxpayers in certain circumstances. In practice, the mechanism shifts the reporting obligation from the intermediaries, covered by the legal professional privilege, to other intermediaries or the taxpayers. Each of them is thus bound to mobilise internal resources in order to (i) understand the complex DAC6 rules and (ii) assess and potentially notify or report relevant transactions, which de facto doubles the work. These stakeholders have sometimes implemented complex and burdensome internal procedures only for the needs of complying with their DAC6 obligations. The complexity of the DAC6 rules and the reporting/notification obligation have created disproportionate costs and administrative burden for both intermediaries and taxpayers. 2) Hallmarks We understand that the legislators intention was to draft hallmarks sufficiently wide to cover different and innovative tax planning techniques. However, the hallmarks are drafted in a too broad way, which does not always allow to capture what the directive targets, i.e. potentially harmful cross-border tax arrangements. On the contrary, too large scope of hallmarks may often lead to situations, where some transactions that are clearly not harmful (which do not present any strong indication of any tax avoidance or abuse) automatically fall thin the scope by mere application of a hallmark. Some hallmarks cover arrangements that are already in essence covered by existing legislations. For example, hallmark B2 covers cross-border conversion of type of income. In our understanding, this hallmark targets also hybrid instruments, yet tax treatment of these is addressed by separate anti-hybrid EU legislation ATAD 1 and ATAD 2. In this regard, it is worth mentioning there has not been any reassessment of the hallmarks in the light ATAD transposition by the Member States. As a result, transactions that cannot be abusive or harmful due to application of other existing legislation must still be notified / reported for DAC 6 purposes as they automatically fall within the scope of certain hallmarks. 3) Differences between the Member States Although wording of the hallmarks is the same throughout the Member States, their interpretation may diverge from one tax authority to another. DAC6 required EU Member States to adopt penalties that shall be effective, proportionate and dissuasive. We note that apart from divergences of interpretation, there is a quite important disparity of penalties. 4) Assessment of the reporting There is little evidence on the effective use of DAC6 data by EU Member States to achieve the objective set by the directive, namely to improve the functioning of the internal market by discouraging the use of aggressive cross-border tax-planning arrangement. To the best of our knowledge, there has been little use of reported transactions by tax authorities as part of their duties.
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Meeting with Aura Salla (Member of the European Parliament)

17 Jul 2024 · Capital Markets Union, EUs competitiveness

Meeting with Bart Groothuis (Member of the European Parliament)

16 Jul 2024 · Investment climate Europe

Meeting with Isabel Benjumea Benjumea (Member of the European Parliament)

25 Jun 2024 · ECON

Meeting with John Berrigan (Director-General Financial Stability, Financial Services and Capital Markets Union)

15 May 2024 · CMU in the Letta Report

Meeting with Kurt Vandenberghe (Director-General Climate Action)

15 May 2024 · Future of the European Union’s Single Market to EU leaders

Meeting with John Berrigan (Director-General Financial Stability, Financial Services and Capital Markets Union) and Fleishman-Hillard

23 Feb 2024 · Energy and climate transition

Meeting with Gerassimos Thomas (Director-General Taxation and Customs Union)

22 Feb 2024 · Physical meeting - Discussion on various issues related to the state of the CMU

Meeting with Anna Cavazzini (Member of the European Parliament)

24 Jan 2024 · the future of EU State Aid policy in relation to Europe’s competition & competitiveness goals

Response to Business in Europe: Framework for Income Taxation (BEFIT)

23 Jan 2024

Invest Europe is the worlds largest association of private capital providers. We represent Europes private equity, venture capital and infrastructure investment firms, as well as their investors. Our association has a global presence, with more than 650 members covering 57 countries, where a big part of them works on more than one European market. While we acknowledge and appreciate the concept and the idea behind the European Commissions proposal for a directive on Business in Europe: Framework for Income Taxation (BEFIT), considering the longstanding efforts by the European Union to establish a common consolidated corporate tax base, we question the urgency of its implementation at this time.
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Response to Business in Europe: Framework for Income Taxation (BEFIT)

21 Dec 2023

Invest Europe takes note of the European Commission's proposal for a directive on transfer pricing. However, we may not see an immediate necessity for this directive, given the existing comprehensive guidance provided by the OECD through its Transfer Pricing Guidelines. These guidelines effectively implement the arms length principle, offering a well-established framework for the valuation of cross-border transactions among affiliated enterprises for income tax purposes. While acknowledging the importance of regulatory incorporation of the guidelines, our stance underscores the robust foundation already laid out by the OECD guidelines in addressing transfer pricing concerns. Please see further comments attached.
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Response to Business in Europe: Framework for Income Taxation (BEFIT)

15 Dec 2023

Invest Europe welcomes the European Commission's proposal for a directive establishing a Head Office Tax system for micro, small, and medium-sized enterprises (SMEs) as a significant development that holds the potential to simplify and harmonize tax compliance for qualifying businesses operating across European borders. As an organisation representing the Europes private equity, venture capital and infrastructure sectors, as well as their investors, we recognise that the HOT Directive has the potential to significantly reduce compliance costs and enhance competitiveness for SMEs within the European Union. In 2022, our members had invested approximately 57 billion euros in SMEs. Last year out of 5,435 companies which received a venture investment from our members, 98% have been SMEs. Same trend can be observed on the private equity side, where investment in the SMEs has reached level of 87% of all the companies in which our members had invested. The detailed position can be found in the attachment.
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Meeting with Mairead McGuinness (Commissioner) and

19 Sept 2023 · European Long Term Investment Funds (ELTIFs), Foreign direct investment (FDI) screening framework, competitiveness, Retail investment strategy (RIS)

Invest Europe urges uniform EU-wide withholding tax relief rules

18 Sept 2023
Topic — This consultation addresses a proposal for a common, standardized EU-wide system for withholding tax relief.
Message — The organization calls for more clarity and uniformity in the legislation to ensure national interpretations are limited. They suggest expanding the definition of dividends and allowing non-EU financial intermediaries to qualify for relief benefits.123
Why — Faster refund procedures would reduce administrative costs and lower tax barriers for cross-border investors.4
Impact — Member States lose tax sovereignty as the proposal limits their ability to apply national regulations.5
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Meeting with Stéphanie Yon-Courtin (Member of the European Parliament, Rapporteur) and Association Française de la Gestion financière

7 Sept 2023 · Retail investment strategy

Meeting with John Berrigan (Director-General Financial Stability, Financial Services and Capital Markets Union)

5 Sept 2023 · EU investment environment

Meeting with Valdis Dombrovskis (Executive Vice-President)

4 Sept 2023 · “EU response to the US Inflation Reduction Act; Capital Markets Union; Sustainable Finance; EU Foreign Directive Investment framework.”

Meeting with Martin Hojsík (Member of the European Parliament)

4 Jul 2023 · Participation in event on Repowering the energy transition: unlocking investment in our future

Response to Interim Evaluation of the InvestEU Programme

10 May 2023

As representatives of the venture industry as a whole, we are no strangers to the role public financing can play in correcting negative externalities and helping infant businesses grow to global champions. EU aid has long sustained the growth of venture and growth-backed businesses, either by directly supporting these businesses in the forms of grants to national businesses or indirectly by committing equity capital to funds through EU or national sources. EIF operating conditions Thanks to the support of Invest EU, the European investment Bank (EIB), and its equity arm, the European Investment Fund (EIF), have played a key role in financing innovation across the continent by acting as investors in venture capital and growth funds. From our perspective, the interim review should hence focus on maximising the role of the EIF as a public fund-of-fund that invests in growing venture and growth funds across Europe. While the relationship between the EIF and venture funds has been largely virtuous, it is unfortunately increasingly hindered by the policy framework and funding constraints under which the EIF operates. There is a mounting concern in the market, that EIF is disengaging from ongoing investments due to these constraints. EIF have over the last 2 decades been instrumental in creating a healthy VC infrastructure in Europe. Putting this at risk at a crucial time is profoundly counterproductive. In our view, it is time to find ways to simplify the way the support is granted from an operational perspective. Launching an assessment of the efficiency/effectiveness of the EIB/EIF vehicles mandates will help determine the areas where improvements can be made. Policy priorities Undoubtedly, more needs to be done to develop specific market segments, such as the scale up market segment where Europe lags behind. This is especially vital in light of increasing international competition namely the US Inflation Reduction Act. However, an adequate continuous support of VC funds in the market segments below 1 billion EUR fund size is required. Indeed, the absence of such support would merely result in a dislocation of the funding gap in the scale up market segment to earlier funding stages. EIFs increasing focus on priority policy objectives through a thematic investment approach must be aligned with market realities in order to avoid that a too narrow definition of eligible investment strategies for target funds makes EIFs intervention counter-catalytic in the funds fundraising process. Moreover, the reclassification of EIFs commitment to funds under the category of public sector investor (as opposed to being counted as market-oriented investor in the past) reduces significantly its catalytic effect in the market and voids its complementary effect next to the involvement of other national public sector investors. Type of aid Finally, in the context of the US Inflation Reduction Act, the Commission should launch a debate on the actual efficiency of state aid designed to support capital expenditures as opposed to aid designed to cover operating costs. The inability of the Union to finance tax breaks may reveal itself detrimental to the block in the long run, especially now that the United States are taking similar action to support its businesses developing green technologies. From our experience, the more sectors have innately higher risk and returns that only come after long periods of time, the more appropriate tax breaks and other types of opex support will be. This should be reflected in the way aid is granted in the future at European level. As an industry, we stand at the disposal of EU policymakers to share with them data and intelligence on sectors our members are investing in to foster any upcoming debates on the move towards more federalised EU funding and a more opex approach to EU aid.
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Response to Enhancing the convergence of insolvency laws

13 Mar 2023

Invest Europe welcomes the European Commissions proposal to further harmonise the insolvency law and procedure across the Member States. We fully support the principles behind the proposal, in particular the intention of shorter, more efficient and less court-led insolvency process. Furthermore, we agree that the introduction of the simplified winding-up proceedings for microenterprises and the possible formation of creditors committee to help with advancing the efficiencies of the procedures, while some provisions, like pre-pack processes phase and rules regarding directors duties, may be considered to leave too much space for interpretation and may cause more differences than harmonization on the European level. Outside of the scope of presented proposal, it is worth factoring into the considerations the current state of transposition and implementation of Directive (EU) 2019/1023 on preventive restructuring frameworks (Restructuring Directive), which has not yet been transposed into national legislation in all Member States or has been transposed but is currently in a nascent state in terms of its use. This means that introducing a further directive on harmonising certain aspects of insolvency laws, without first making sure that the existing system works in practice across Member States, may cause further fragmentation of the market and practice across Europe. Please, find our detailed position in the attachment:
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Meeting with Axel Voss (Member of the European Parliament, Shadow rapporteur) and BUSINESSEUROPE and

8 Mar 2023 · Corporate Sustainability Due Diligence

Invest Europe Urges Proportionality in Foreign Subsidy Reporting Rules

6 Mar 2023
Topic — Procedural rules for notifying the European Commission about distortive foreign subsidies in the internal market.
Message — The group requests a simplified approval process and reduced reporting requirements for investment funds. They advocate for aligning reporting thresholds across different regulatory regimes.12
Why — This would reduce administrative overhead and lower compliance costs for private equity firms.34
Impact — The European economy loses investment if disproportionate regulations discourage firms from participating in transactions.5
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Meeting with Barry Andrews (Member of the European Parliament, Rapporteur for opinion)

17 Jan 2023 · CSDDD

Meeting with Frances Fitzgerald (Member of the European Parliament, Shadow rapporteur for opinion)

14 Nov 2022 · Corporate Sustainability Due Diligence (Assistant on behalf of MEP)

Meeting with Axel Voss (Member of the European Parliament, Shadow rapporteur) and EUROPEAN TRADE UNION CONFEDERATION and

7 Nov 2022 · Corporate Sustainability Due Diligence

Meeting with Billy Kelleher (Member of the European Parliament, Shadow rapporteur)

1 Sept 2022 · AIFMD

Invest Europe seeks revisions to DEBRA tax equity proposal

29 Jul 2022
Topic — European Commission initiative to reduce the tax bias favoring debt over equity financing.
Message — The organization calls for more proportionate anti-abuse rules and better coordination with existing tax laws. They warn that the current plan for limiting interest deductions is counterproductive and overly complex.12
Why — These changes would help private equity investors maintain flexible financing options and avoid increased tax costs.3
Impact — High-risk start-ups would struggle to secure funding if internal group financing is restricted.4
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Invest Europe demands broader professional investor definitions

30 May 2022
Topic — The initiative aims to boost retail investor confidence and participation in European capital markets.
Message — Invest Europe supports improving financial literacy and developing suitability assessments for long-term asset classes. They advocate for broadening the professional investor definition to include experienced individuals. Finally, they warn against over-harmonized disclosure documents that can be factually inaccurate.12
Why — This would allow funds to attract more capital from sophisticated individual investors.3
Impact — Retail investors could suffer from oversimplified disclosures that provide factually incorrect product comparisons.4
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Meeting with Billy Kelleher (Member of the European Parliament, Shadow rapporteur)

18 May 2022 · AIFMD

Response to A New European Innovation Agenda

4 May 2022

We would like to comment on this initiative in our quality as representatives of the private equity and venture capital industry. Our members raise funds from a wide range of investors and use it to invest equity, for an average of five years, into start-ups and scale-ups. Thanks to the active involvement of the fund manager, the invested company is able to grow until the point it can be traded on the stock market or bought by a third party. The business model of our members makes them as essential link of the innovation financing chain, as it allows them to act as a bridge between, on one hand, savers and pensioneers investing in pension and insurance products and, on the other, start-ups and scale-ups. If we share the Commission’s overall objective of supporting the green and digital transitions through investments in innovative companies, we also share its concern that access to finance remains difficult for these businesses, in particular at the “late stage” end of their growth. However, efforts to close the scale-up gap should not divert the Commission’s attention from the fact that many European venture capital markets remain so underdeveloped that even investments into small start-ups is below par. One of the reasons for this, beyond cultural factors, is the regulatory barriers that remain in place for institutional and sophisticated investors, such as high net worth individuals, to support innovative businesses though venture funds. This is especially true in the CEE region – where large pension funds remain sometimes unable to commit capital to private equity. In these countries, improving access to finance is also about best leveraging the existing public intervention. For these markets to ultimately mature, public capital should crowd-in rather than crowd-out private managers and operate under market-like standards. On most developed markets, concerns rather relate to the perception of the asset class being riskier than it is, as EU prudential frameworks for banks and insurers disregard the diversification benefits fund investments can bring. Facilitating exits, by making IPOs less expensive, will also play in the overall attractiveness of making investments in innovative businesses through venture and growth funds. Regarding access to talent, we support the ideas put forward by Scale Up Europe to create a tech worker status for European talent, with a standardised contract and the portability of social rights across the continent. Fast-track European tech visa for non-Europeans and a favourable expat tax regime would also help innovators to move across Europe with lower concerns. Finally, shrinking the divide between the EU and the United States on innovation will not be possible without building a strong Single Market. Without this, it is doubtful successful start-ups, whether in the tech, energy or healthcare sectors, will stop choosing to scale-up on the US market rather than on the European hand. On that end, we support the view that driving innovation ecosystems and building clusters will go hand in hand with building a regulatory framework that immediately considers latest technological developments. For examples, EU insolvency rules should better reflect that entrepreneurs need to fail several times before setting up businesses of tomorrow. Protectionist forces in the competition and foreign investment spaces could also impact the ability of entrepreneurs to innovate. Invest Europe would be keen to give the Commission additional insights on the way its members experience the EU innovation gap and what other changes could be introduced for the EU region to become again the innovative powerhouse it has historically been.
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Response to Fighting the use of shell entities and arrangements for tax purposes

6 Apr 2022

Please see attached Invest Europe's feedback to the European Commission's Proposal for a Directive to prevent the misuse of shell entities for tax purposes.
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Response to Minimum level of taxation for large multinational groups

6 Apr 2022

Invest Europe is pleased to see that the European Commission’s proposal on a minimum level of taxation for large multinational groups closely follows the OECD Model Rules for Pillar Two. When taxing companies which are part of global value chains, the global aspects must be taken into account. Diverging regimes at EU and international level can be a huge challenge for companies, and would increase the complexity and compliance burden. Therefore, an EU directive which is closely in line with the OECD agreement is key, in order to ensure certainty and consistency, and thereby make sure that it remains attractive to invest in the EU economy and EU businesses. We are in particular happy to see that the proposed EU implementation is aligned with the OECD wording on the scope and carve outs for investment entities, which are necessary in order to preserve the tax neutrality for investment funds. In order to maintain consensus and ensure effective implementation across the EU Member States, we would equally encourage the European Commission to ensure that any potential guidance at EU level is likewise in consistence with the OECD approach and the technical guidance published by the OECD. Finally, we support calls for any deferral of the implementation timeline, in order to allow sufficient time for businesses to fully understand and implement the new framework.
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Meeting with Jessica Polfjärd (Member of the European Parliament, Shadow rapporteur)

15 Mar 2022 · ELTIF

Meeting with Michiel Hoogeveen (Member of the European Parliament, Rapporteur) and BVI Bundesverband Investment und Asset Management e.V.

9 Feb 2022 · ELTIF

Response to New EU system for the avoidance of double taxation in the field of withholding taxes

26 Oct 2021

Invest Europe welcomes the European Commission’s initiative to investigate a common EU-wide system for withholding tax on dividend or interest payments, as we encourage the idea of removing tax barriers to cross-border investment. We support the principles of tax simplification and closure of abusive practices, and initiatives to make such processes simpler and clearer and decrease any cross-border tax frictions would be appreciated. In this regard, a simplified and streamlined EU-wide system, provided that it is done right, could very well be part of the solution and is worth exploring further. At first glance, the options suggested in the Roadmap would all contain good ideas when it comes to facilitating withholding tax exemptions. We would however need to understand better the impacts of these different options, in order to provide more detailed feedback. Nonetheless, we would like to flag initially the following points, which we believe are key to consider in case of any potential policy changes. From a private equity perspective, it is key that the exemptions from withholding tax under EU tax directives (the Parent-Subsidiary Directive and the Interest and Royalties Directive) are protected; this is also true for the exemptions and reductions from withholding tax under the Double Tax Treaties. This is essential to ensure tax neutrality of the funds, and thus ensure that an investor’s choice between investing in EU businesses directly or via a private equity fund is not distorted by differences in tax regimes. While encouraging the idea of a common EU-wide system for withholding tax, we believe that it must be clarified that as long as the relevant agreements are in place, withholding taxes will not be charged solely for the reason that a holding company is used in the investment structure. Changes to the existing system must therefore be considered carefully. In the private equity industry, intermediaries such as holding companies are set up for various genuine and substantive commercial or legal purposes, and are in no way used for aggressive tax planning or tax evasion. Such legitimate purposes could for example be to offer lenders single point of enforcement, to organize governance amongst various shareholders, in order to ring fence investment by a category of investors (e.g. management), for regulatory purposes, in order to launch an IPO, etc. These holding companies may have limited activity on their own, they do not need a lot of economic substance (in terms of formalities such as employees, offices, etc.) for their function, and they are mainly active when there is an investment activity. However, they are required for investment purposes, and this facilitates international investment and job creation. Therefore, it must be secured that they are not unfairly targeted and that withholding taxes are not charged at portfolio company level because of the existence of such intermediaries, irrespective of whether the holding companies decide to re-invest the proceeds or to distribute the proceeds derived from the portfolio companies to the funds and their investors soon after receipt of the proceeds; an approach which is already recognised by several jurisdictions.
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Meeting with Mairead McGuinness (Commissioner) and

7 Oct 2021 · Private Equity

Meeting with Andrea Beltramello (Cabinet of Executive Vice-President Valdis Dombrovskis)

30 Sept 2021 · Solvency II, Basel implementation

Response to Revision of Non-Financial Reporting Directive

14 Jul 2021

Invest Europe welcomes the CSRD proposal. As a data driven industry, we support the view that to achieve sustainable and inclusive growth it is key to have relevant, comparable and reliable sustainability information as a pre-requisite for tracking progress and, ultimately, meeting the EU sustainability targets. Although most Invest Europe members do not fall within the scope of CSRD, they are indirectly impacted by it since a number of their portfolio companies will be or become subject to the rules. The information disclosed by portfolio companies will also be relevant for private equity and venture capital (PE/VC) firms’ own reporting exercises and compliance with the Sustainable Finance Disclosure Regulation (SFDR). That said, PE/VC fund managers are currently able to specify and obtain the non-financial information they require from investee companies, to meet their own regulatory obligations or to satisfy the needs of fund investors, in a great level of detail and in areas suitable to their and their investors’ needs. This is a consequence of the extensive knowledge reporting and organic exchange of information that grows from the relationship between PE/VC investors and company owners. In this context, there are some CSRD aspects that deserve particular attention. It is critical to ensure the CSRD is aligned, consistent and compatible with reporting requirements that will follow/are in place from other EU legislation, such as the SFDR and the Taxonomy. Coherence and synergies between reporting obligations under different frameworks are essential to ensure efficiency and a smooth implementation, facilitating compliance, alleviating costs for companies and minimising duplication of efforts. Not only the content, but also the timelines should be aligned to ensure that the efforts made by the different parts of the supply chain are complementary. In addition, we support the Commission’s gradual approach to application which should allow market participants to adjust to any additional or changed requirements. Equally crucial are the materiality and proportionality principles (one size does not fit all). Any extension of the scope, in particular to SMEs, should require a full application of proportionality so as not to add a disproportionate burden and/or excessive costs. SMEs have proved to be at the core of the European economy and in the context of the recovery from the ongoing crisis any new or revised legislation should be considerably calibrated and realistic to reap the benefits of ESG data without negative spill over effects. We support the Commission’s proposal to develop separate, proportionate and simpler standards for SMEs, which non-listed SMEs could choose to use on a voluntary basis. That said, we recommend assessing any possible indirect knock-on effects on unlisted SMEs, which, even if not subject to CSRD, may have to do sustainability reporting as part of a supply chain to meet the requests of their investors. It is important to strike a balance between legitimate business interest in maintaining confidentiality of business plan and wider public policy requirements (if any) to disclose forward-looking information. Any forward-looking information should only apply to targets set by the company in the ESG domain and should not relate to commercial or any other information that could endanger the competitive situation of the company. We welcome the Commission’s recognition of this and the possibility to omit any information that “would be seriously prejudicial to the commercial position of the undertaking”. Conscious of the significant costs this would bring, we support the Commission’s progressive approach to the introduction of the assurance requirement, starting with limited assurance. Given the international nature of the PE/VC industry, we support the EU’s ambition to achieve the worldwide convergence and harmonisation of sustainability reporting standards to avoid unnecessary regulatory fragmentation.
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Response to Debt equity bias reduction allowance (DEBRA)

12 Jul 2021

Invest Europe welcomes the European Commission’s initiative to look into possible options to mitigate a potential debt-equity bias induced by taxation, and would like to share the following points, which we believe are important to take into account when designing such a system. First and foremost, we endorse the European Commission’s efforts to promote equity financing, of which private equity and venture capital is a crucial element. Indeed, equity investments play a fundamental role in supporting future growth, innovation and transitions. However, we would like to stress that debt and equity financing should not be seen as in conflict or mutually exclusive. Rather, they are often complementary to each other, for example in a private equity context. There are various ways of setting up financing for especially small and innovative companies, and therefore it is crucial to get the tax deductions of costs related to financing right, in order to facilitate and support companies’ access to capital. Moreover, while we understand the aim to reduce a tax induced debt-equity imbalance, even further than it has already been reduced, it is important that this issue is dealt with in a way that is helpful and not detrimental to the access of diversified sources of financing for companies, keeping in mind the already existing measures restricting interest deductibility. For instance, ATAD 1, ATAD 2 and countries’ additional constraints are already reducing the bias of debt-equity imbalance. The choice between equity and debt is not made by companies solely because of tax reasons, but because of various other considerations. For instance, equity has significant governance implications (e.g. as a result of dilution of voting rights, giving access to boards, etc.). The choice is also often influenced by the fact that not all types of financing are available at a given time, particularly so for smaller companies and start-ups. As also acknowledged in the impact assessment of the 2016 CCCTB proposal, also referred to in the present roadmap, the expected economic benefits of introducing an equity allowance are overall positive and should lead to moderate increases in investment, employment and growth. We are happy to support such idea and to enter into further discussions on how it can be realised in the best possible way. On the other hand, while disallowing tax deduction of interest on debt might be efficient in eliminating the bias, it is in the same impact assessment acknowledged that it would have negative effects on growth and employment due to depressed investment, an analysis we share. Disallowing the deductibility of interest payments would especially penalize enterprises that lack easy access to equity and have instead to rely on debt financing to create jobs or invest in equipment. Small and innovative companies would probably be disproportionately impacted because they often rely on debt financing to fund growth initiatives. In continuation of this, as investors providing SMEs, start-ups, scale-ups and other innovative companies with active support and long term financing, which they often would not have been able to get elsewhere or it would have been too expensive, we support the idea of designing a special measure for SMEs, as we are well aware that they typically find it more difficult than more mature companies to find financing. We would very much welcome the opportunity to exchange views with the European Commission on this important topic, and we would be happy to discuss in greater detail how an allowance for costs of equity financing should look like in order to fully be able to fulfil the purpose of encouraging and supporting equity financing.
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Meeting with Nathalie De Basaldua (Cabinet of Commissioner Mairead Mcguinness)

22 Jun 2021 · Commissioners participation at an InvestEurope conference and general discussion on venture capital and private equity

Response to Retail Investment Strategy

5 May 2021

Invest Europe supports the European Commission’s objective to develop a coherent regulatory framework to empower consumers to make informed investments in EU capital markets. Traditionally, the private equity industry is only marketing to investors that are either institutional (pension funds, insurers, banks, sovereign wealth funds, fund-of-funds) or at the very least experienced (family offices, entrepreneurs). The reason for this comes from the very nature of the industry. In order to make long-term and active investments into unlisted businesses that require time to grow and evolve, private equity funds have structured themselves as closed-ended funds with no redemption rights, which favour illiquid and large commitments from investors in a position to make such investments. Currently, the only investors classified as retail under EU law committing capital to private equity are arguably not retail. High net worth individuals committing capital into venture funds are large and experienced investors with a detailed knowledge of the market, which are limited partners into the fund they invest. Our opinion is that these are only deemed retail under EU law due to the inadequacies of the current MiFID investor categorisation. Indeed, such a definition does not take into consideration their investing specificities (market knowledge that is sector-related, frequency of investment that is not one day-traders). As announced in Action 8 of the CMU Action Plan, a revision of the Annex II of MiFID is therefore warranted. On the other hand, situations where private equity managers market to individuals committing smaller tickets - and which are objectively retail clients - are rare. The attractiveness of the private equity asset class and the desire from some investors to commit capital indirectly into start-ups and scale-ups is however driving an increasing number of private equity funds to offer products that are directly available to retail clients. This is a positive development as it will foster currently low capital market participation rates. In that spirit, one must appreciate that the ELTIF regime is deemed by private equity market participants as the future vehicle of choice for marketing to these type of investors. Changes to the ELTIF regime (as opposed to an opening of the AIFMD regime to retail investors) is therefore, from our perspective, the main tool to ensure that more private equity funds are accessible to retail investors through relevant intermediaries. We fully acknowledge that retail marketing should be subject to an appropriate set of rules that differs from the ones applying to professionals. Fees transparency, adequate risk disclosure and proper incentives mechanisms are three crucial pillars of a retail framework. We also agree that a further degree of harmonisation may help consumers better understand market products, provided of course such harmonisation allows the investor to recognise the distinctions between different types of products, both in terms of fee structure (in a private equity context, the recognition of the features of the carried interest model is a good example), risk profile (diversification benefits) and underlying nature of the investments (active involvement in unlisted businesses, as opposed to a basket of shares). We are at the disposal of the European Commission would it wish to have further information on the retail trends in the private equity industry and welcome the further initiatives it will take to ensure it is easier and more secure for these investors to invest in European capital markets.
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Meeting with Andrea Beltramello (Cabinet of Executive Vice-President Valdis Dombrovskis)

29 Apr 2021 · Capital Markets Union

Meeting with Florian Denis (Cabinet of Commissioner Mairead Mcguinness)

23 Apr 2021 · CMU/AIFMD/ELTIF

Response to Business taxation for the 21st century

1 Apr 2021

Invest Europe welcomes the EC’s initiative to take stock of discussions in international forums on reforming the international tax system and set out a vision for business taxation in the EU to ensure that the system is appropriate for the modern economy. In this context, we would like to share the following points, which we believe should be considered, in order to ensure that the business taxation framework across the EU responds to the realities of the modern globalised and digitalised economy. First and foremost, a tax regime for the 21st century should encourage the innovation and research needed for the green and digital transition by creating the right policy and environment for start-ups, scale-ups and R&D, which play a crucial role in this transition. Furthermore, any tax regime that is to be future proof needs to entail incentives for investments and for retaining capital. One element we think is worth exploring is incentives for businesses to involve employees in taking ownership. An important factor behind the success of a start-up is its ability of attracting and retaining the right talent, and one way it can be able to do so is by providing stock options to its employees. However, for the ultimate success of such incentives, it is necessary to have the right tax framework. We believe the right tax incentives will allow start-ups and scale-ups to attract the talent they need to continue growing. Moreover, a harmonised tax treatment of stock options across the EU would create a level-playing field. Finally, as also reiterated in the paper on “Effectiveness of tax incentives for venture capital and business angels to foster the investment of SMEs and start-ups” prepared for the EC, venture capital is more common in countries with more generous taxes, allowing to incentivise key personnel with stock options. Tax incentives encouraging stock options can therefore also promote venture capital funding. Another aspect we find worth looking into is tax deductions for the companies that can contribute to the green and digital transition and the recovery of the European economy after the COVID-19 crisis. Innovative start-ups, scale-ups and companies active in fields such as green and digital technologies, circular economy, life sciences, infrastructure, health and deep-tech play a crucial role in the recovery and transition, in the creation of jobs, and in tackling the health threats posed by the virus. All of this should be encouraged and supported by the right tax incentives. As an industry committing long term and active capital to these innovative businesses, we see benefits in looking into incentives such as super deductions for R&D, development of assets, start-ups and scale-ups, as well as long term deductions in these areas. Furthermore, in order to encourage investments in these companies, tax deductions for such investments could also be considered particularly for seed/early-stage investments. The private equity and venture capital industry stands ready to actively contribute to the green and digital transition and economic recovery we have ahead of us, and such incentives would enable the industry to maintain and further boost its role as driver of innovation. Finally, when taxing businesses which are part of global value chains, the global aspects must be taken into account. Therefore, it is important that the upcoming EU initiative on digital levy is consistent with and builds on the OECD work on Pillar 1 and Pillar 2. Having two different regimes – one at EU level and one at international level – would increase the complexity and compliance burden and the risk of double taxation. This could also lead to a situation where investments in the EU are more expensive and less attractive than in other territories, which would be to the detriment of the EU economy and EU companies depending on those investments, in particular in the times during and after the COVID-19 crisis, where investments are all the more needed
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Response to Europe’s digital decade: 2030 digital targets

9 Mar 2021

By participating and actively engaging in the EC’s common digital plan towards 2030, Invest Europe wants to ensure the role of start-ups, venture capital and private equity as drivers of innovation is acknowledged. We believe them to be crucial players in making the digital transformation successful. Moreover, we hope the EC will make creating the right incentives, as well as the right policy and tax environment for innovative start-ups and companies a priority in the context of the 2030 digital targets. That said, Invest Europe welcomes the initiative of the European Commission of establishing a clear pathway to a common digital decade vision for the EU, Member States and its citizens. We believe this is indeed needed to complement and coordinate the already existing policies, strategies, and initiatives on the topic which right now are somewhat fragmented. All our feedback to the Roadmap can be found in the attached file.
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Meeting with Tommy De Temmerman (Cabinet of Commissioner Mairead Mcguinness)

26 Feb 2021 · Introduction to invest europe, Basel III

Meeting with Nathalie De Basaldua (Cabinet of Commissioner Mairead Mcguinness)

9 Feb 2021 · introductory call

Response to State aid rules for Research, Development and Innovation

11 Jan 2021

By clarifying the conditions set out in the General Block Exemption Regulation (GBER), the EU Risk Finance Guidelines (RFG) allow many start-ups and scale-ups to benefit from state aid support. As such, they are a crucial tool to foster innovation within the EU. As the association representing all types of private equity funds, including venture capital and growth ones, we broadly support the current Guidelines, which have been helpfully tailored to the specificities of businesses our members provide private support to. Nonetheless, the current review still provides an opportunity to introduce additional flexibility within the GBER and RFG frameworks. This would ensure improved access to financing and support to innovation across the EU, also in the context of the economic consequences of a pandemic we have all faced in the past few months and will continue to face in the coming years. Guidelines contain a crucial exemption from the undertakings in difficulty definition for “SMEs within 7 years from their first commercial sale”. Two amendments could make it easier for innovative businesses to be eligible in all relevant cases: (i) tailoring the definition of an SME for venture-backed firms As recognised by the European Commission in the preparatory work on the review of the SME Recommendation, the current definition – and more specifically the concept of a “linked enterprises” - prevents businesses which receive majority ownership from a venture fund (and any kind of ownership from a growth fund) to be eligible to this status. RFG should clarify that venture ownership has very distinct characteristics from trade group ownership (exit strategy, separated investments, absence of strategic interest, absence of central management). In the absence of a revision of the SME Recommendation, taking into account such characteristics in the RFG will ensure majority-owned VC and growth-backed companies remain eligible. (ii) providing clearer exemptions to the 7 year mark in defined cases It is explicitly recognised in the RFG that this period may be too short for innovative companies but more needs to be done. For example, an extension to 10-12 years could be granted based on a set of principles in combination with a "white list" of sectors/business activities. On top of these two changes, we suggest targeted amendments to existing concepts set in either the GBER or the RFG: - follow-on investments The condition for a follow-on investment to be “foreseen in the original business plan” is understandable but is difficult to apply in a VC context, where business plans are constantly revised and refined as the business and the markets in which it operates evolve. It would be better to recognise that follow-on investments should be allowed for those businesses where a further injection of capital (of an amount and for a purpose which is broadly identified) has been foreseen and expected from the start to achieve the stage of development for which the investment has initially been made. - “first loss pieces” The terminology used in the GBER and FG for the most junior risk tranche that carries the highest risk of loss creates some uncertainty. The definition used in the RFG, which is more appropriate to the specificities of VC-backed firms, should also be applied in the GBER. - “replacement capital “ Conditions for the use of “replacement capital” in the GBER (Article 21.7) are at odds with broader policy objectives of overcoming market failures in SME finance, and encouraging SME job creation. Restrictions on replacement capital can not only distort the natural activities of a company, but go even further, by potentially removing part of the financing chain.
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Response to Review of the VAT rules for financial and insurance services

19 Nov 2020

The private equity industry welcomes the European Commission's initiative to assess the relevance of the current VAT rules for financial and insurance services, notably in the light of developments in the sectors and recent case law challenging practices allowed by most Member States. We have found it appropriate to provide a relatively high-level response at this stage, notably since the study, which we understand would provide the factual basis for a possible future review, is yet to be published. We would need to understand better the impacts of different scenarios, and we would need a clearer view of the options in order to provide more detailed technical feedback. However, we would like to flag initially the following points, which we believe are key no matter what form the review of the VAT rules might take. Firstly, a sober view on VAT across financial services in terms of the scope, and in particular the sectors included in the scope, must be ensured. Possible exemptions must be applied for relevant participants of the financial market, recognising that one-size fits all does not apply and a situation where some services are made less attractive in comparison by the mere change of VAT rules must be avoided, this in order to safeguard the multifaceted contributions to European economy and avoid unnecessary competitive distortions between the private equity industry and other financial services. Secondly, it should be kept in mind that changes to VAT rules will not necessarily have a positive impact on VAT revenues, and that end investors might not be able to recover VAT. Finally, these elements are necessary in order to ensure a system that encourages and not discourages investments, which is key in order to achieve the ambition of a strong Capital Markets Union. We therefore strongly encourage the European Commission to take the above considerations into account in a possible revision of the rules on VAT treatment of financial and insurance services.
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Response to Strengthening the consideration of sustainability risks and factors for financial products (Directive (EU) 2017/593)

6 Jul 2020

Please note the introduction in Invest Europe’s response to the Draft Delegated Regulation (EU) 2017/565 about the relevance and application of MiFID in a private equity context. The proposed amendments to this Delegated Directive seem fine for the circumstances in which the product governance rules apply. Invest Europe has no further specific comments on this. That said, we want to share a concern with the way MiFID has been implemented in certain countries, in particular in relation to what has been considered as “marketing”. Invest Europe has always considered that affiliates of the manager of an AIF conducting marketing activities are not covered within the scope of MiFID as the marketing of the AIFs is not a MiFID activity/service. Marketing is neither giving investment advice (given and as long as the entity that is offering the AIF units is only doing so on behalf of the AIFM) nor reception and transmission of orders (given and as long as the entity is not involved in the subscription process and its activities are simply limited to providing fund documentation and marketing materials, clearly acting on behalf of the AIFM and not for the account of the investor). This interpretation is in line with the logic of AIFMD itself. Marketing within AIFMD is not necessarily a MiFID service. Under AIFMD, reception and transmission of orders in relation to financial instruments and giving investment advice are non-core services of an AIFM which require a MiFID top-up authorisation (Art 6(4)(b) AIFMD), whilst the “marketing” of AIFs (including “third party” AIFs with respect to which the AIFM is not performing the portfolio and risk management functions) is referred to as a function that an AIFM may additionally perform under the AIFM authorisation (Annex I(2)(b) AIFMD). In light of this, if – against our view - it is considered that marketing is treated as reception and transmission of orders, it is important to allow firms conducting marketing activities on behalf of AIFs to regard themselves as acting only for the fund or its AIFM. We ask the Commission to clarify that a firm should be able to inform a prospective investor to whom it conducts marketing, that the investor is not a client to whom the firm performs a MiFID service and owes regulatory obligations in case the firm: • does not provide investment advice (a tailored investment recommendation based on the investor’s existing portfolio) to the investor; or • does not take steps to execute the investor’s order to invest in the fund, either by executing the order as the investor’s agent or by conducting “reception and transmission of orders”, which is taking responsibility for the investor’s order by transmitting it to the fund on the investor’s behalf. As a matter of practice, firms conducting marketing activities on behalf of AIFs will not usually provide these services, or give any indication to the client that they do. Those firms will not provide investment advice and will usually direct the investor to submit its subscription agreement to the fund or the fund’s administrator. To provide investment advice to the investor would raise an acute conflict of interest, given the firm has been appointed by the fund or its AIFM and to act in the fund or its AIFM’s interests. Such a clarification could be obtained for example by clarifying the concept of “bringing together two investors” as set forth in Recital 44 of MiFID II. This would align the position of firms conducting marketing activities on behalf of an AIFM with EU corporate finance firms which act for issuers raising capital. In that circumstance, corporate finance firms will make it clear to investors participating in the capital raising that they only act for the issuer and do not owe any regulatory duties to the investor. Corporate finance firms conducting MiFID activities in this context could not observe client relationships on both the buy-side and sell-side, given the conflicts of interest involved.
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Response to Strengthening the consideration of sustainability risks and factors for financial products (Regulation (EU) 2017/565)

6 Jul 2020

As a starting point, we would like to note that private equity fund managers are typically regulated under the Alternative Investment Fund Managers Directive (AIFMD). However, some private equity businesses or sub-businesses might also operate under a MiFID licence. Private equity firms holding a MiFID licence, in the vast majority of cases, provide only a few limited investment services, such as the reception and transmission of orders and investment advice. They cannot hold client money or securities, they do not generally need to deal or take portfolio management decisions and their clients’ investments are not likely to be affected by short-term market movements. Such firms could include adviser/arranger firms that assist private equity funds and their managers to invest into companies and may assist third parties to invest in private equity funds. Private equity firms that hold a MiFID licence are generally smaller firms when compared to other investment firms as they typically have a very small number of professional advisory clients (which could just be a fund manager in the same group as the adviser/arranger). This is in contrast to investment firms with a large number of retail clients. Bearing the above in mind, Invest Europe welcomes the high-level, principles-based approach adopted by the European Commission. We prefer such an approach to one that is overly prescriptive. It provides a certain level of flexibility, which is key to enable financial market participants to implement the requirements in a way that is in line with their business needs and supports the needs of their individual portfolio companies. As regards the specific provisions: • Definitions: We welcome the recognition of materiality in the definition of sustainability risks. The determination of materiality is investment entity and situation-specific: materiality may vary considerably depending on the ESG issue in question, the timeframe, the investment practice and strategy, market/sector/industry, country/geography, supply chain, company and exposure to natural resources. Materiality should be considered in each specific case and each investment needs to be assessed qualitatively on its merits. • Organisational requirements: We support the recognition that these requirements should be complied with bearing the proportionality principle in mind, i.e. taking into account the nature, scale and complexity of the business of the firm, and the nature and range of investment services and activities undertaken in the course of that business. • We have no particular concerns regarding the other proposed amendments.
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Response to Integration of sustainability risks and factors related to alternative investment fund managers

6 Jul 2020

Invest Europe welcomes the Commission’s principles-based, non-prescriptive approach. Allowing for a level of discretion is key to strike a proper balance between the need for harmonisation and the need for flexibility, as such avoiding imposing unnecessary, additional burden on AIFMs, in particular small and mid-market firms with lower income and ability to absorb additional analysis and reporting costs, and enabling AIFMs to align the implementation of the new requirements with their business needs and those of their individual portfolio companies and investors. In addition, in light of the diversity among market practitioners within every industry, it is crucial to avoid a one-size-fits-all approach and to strive for appropriate rules that are practical, workable and proportionate. We agree: • with the recognition of materiality in the definition of sustainability risks. Materiality should be considered by each investment entity for each specific investment. • that sustainability risk should be part of the overall risk management function of an organisation. Rather than a standalone topic/overriding risk category, sustainability should be considered as one of a number of risks that form part of the overall investment risk matrix, both for the acquisition of new assets and for the management of existing portfolio assets. • that, as a category of business risks, the identification and management of sustainability risks should be incorporated in existing internal processes, systems, functions, controls and resources with ultimate and explicit responsibility at the top level of an organisation. However: • There is inconsistency between the proposed changes to Art 18 and the SFDR. According to the latter, AIFMs taking into account principal adverse impacts at the entity level may choose not to integrate them in each and every product they manage (opt-out), they can decide for which product such impacts are relevant. Under the draft L2 measures, it reads like the new para 6 does not leave the choice to AIFMs applying the adverse impact assessment to opt-out at the product level. • As proportionality will be key, it may be useful to clarify that para 2 of Art 22 continues to apply to para 1 and the new para 3. Also, we believe that “real”, established expertise is very difficult to achieve (as recognised in ESMA’s Final Report, point 20) and this concept does not correspond to the reality of what will be put in place by AIFMs to ensure sufficient knowledge of the subject matter. We suggest including other wordings such as “sufficient knowledge or skills”. • We see no need for a specific para on the identification of potential conflicts of interest (“CoI”) as regards the integration of sustainability risk. While issues such as those listed in the Recitals would give rise to other regulatory issues (e.g. being considered as failure to act with due skill, care and diligence, or to act in the best interests of the AIF), we do not see how they can give rise to conflicts or impact the CoI policy. Conflicts arise out of duties, or own interests. It is hard to see how the integration of sustainability risk (i.e. financial impact on portfolio) could create new duties, or new own interests which would diverge from the interests of the AIFs or investors in the AIFs. If they did, the existing provision in Art 31(2)(a) is already expansive enough to require the identification, mitigation and management of such conflicts. Including the new language could be confusing in that it might lead some people mistakenly to think that firms have duties to promote sustainability outside the context of their contractual or fiduciary duties to the fund and the investors in the fund. The outcome could be different in relation to principal adverse impacts on sustainability factors. In addition, and as regards the remuneration policy (which may be an element to prevent CoI), the responsibility under the draft L2 measures seems more stringent than in the SFDR.
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Meeting with Aliénor Margerit (Cabinet of Commissioner Paolo Gentiloni)

3 Mar 2020 · Green Deal and investment in Europe

Meeting with Andrea Beltramello (Cabinet of Executive Vice-President Valdis Dombrovskis)

21 Feb 2020 · Capital Markets Union

Meeting with Keith Sequeira (Cabinet of Commissioner Carlos Moedas)

11 Apr 2019 · Venture Capital in Europe

Response to Amendments to the implementing rules on solvency applicable to insurers

7 Dec 2018

Invest Europe, the association representing both private equity fund managers and investors in the asset class such as insurers, has long been in favour of reviewing the Solvency II risk-weights for unlisted equity. The current calibration does not appropriately capture the real risk of investing in long-term, closed-end private equity funds, and therefore inappropriately disincentivises insurers from investing in the asset class. In light of this, we regret the Commission fails to take this opportunity to reconsider the current risk calibration for investments in equity funds. The Solvency II approach remains fundamentally inappropriate for insurers gaining exposure to this asset class by building a portfolio of funds, as it does not take into account the benefits of diversification and the expertise of the fund manager. We therefore hope the Commission will, as part of the upcoming review of the Solvency II Directive, move away from a method based on a look-through to the individual underlying companies. We nonetheless appreciate the clarification made to Article 168 that, for assessing whether a fund is leveraged, the exposure of the AIF should be calculated in accordance with the commitment method. As long-term investors, our members welcome the creation of a new category of long-term equity investments subject to a reduced shock of 22% in Article 171a. However, this Article will exclude investments made via fund structures (principally because funds are not always “companies” under national law). Given there is no economic or policy reason to justify the exclusion of investments through funds from the scope of this Article, modifying the proposal to include a clear reference to collective investment undertakings would be essential from our point of view. Excluding investments via funds from the new category would run counter to the overall objective of the Capital Markets Union project and would undermine its specific efforts to boost venture capital in Europe such as the new VentureEU fund-of-fund programme and the revised EuVECA framework. In addition, the proposed average holding period excludes from the scope investments that are widely recognised as long-term by insurers, do not have redemptions rights and are not affected by short-term volatility. Nearly all private equity fund investments would on average fall outside the proposed 12-year period as insurers will typically commit capital to the fund for a period of 10 years. It is also important to stress that only the expected average period of investment in the fund (and not in underlying companies) will be appropriate to determine the length of the investors’ assets commitment, given the insurer will have stakes in the fund and not in the companies in which the fund invests. Moreover, we believe that there is no justification to restrict this category to companies based in the EEA from a prudential perspective. A reference to OECD countries, as is currently the case for the infrastructure categories, would be far more appropriate. In order for the provisions to be legally sound, the Commission should also determine whether the fund the insurer has invested is also subject to this geographic criterion (by inserting a reference to the fund in this paragraph). Finally, the underlying objectives of the ring-fencing condition should be spelled out. They should only ensure there is a distinction between the subset of equity investments, where all assets are intended to be held until the liquidation of the fund, and the rest of the insurers’ portfolio. The Commission should make it clear that investments in a private equity fund would meet the conditions to be deemed ring-fenced provided investments are made through special purpose vehicles for managing private equity investments.
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Meeting with Florentine Hopmeier (Cabinet of Vice-President Jyrki Katainen)

15 Oct 2018 · Invest Week

Meeting with Andrea Beltramello (Cabinet of Vice-President Valdis Dombrovskis)

3 Sept 2018 · Solvency II review

Meeting with Andrea Beltramello (Cabinet of Vice-President Valdis Dombrovskis)

24 Apr 2018 · Cross-border distribution of investment funds

Response to EU small listed companies Act

15 Jan 2018

The private equity industry agrees with the European Commission’s assessment that smaller firms are often discouraged from seeking to launch an Initial Public Offering (IPO) on public markets and we therefore support the ongoing initiative to reduce the burden of public offering for this type of companies. While investors need reliable information about potential risks associated with their investments on capital markets, it is our understanding that existing listing costs and requirements are currently seen as disproportionate by various types of market players. Given their size and level of sophistication, smaller entities are naturally most affected by the existing regulatory burden. As a result, these firms are often struggling to gain access to public markets and this leads to a shortage of listed SMEs on EU exchanges. Listing costs and burdensome requirements do not only have implications on the vitality of European stock exchanges but they could also impact the financing of these companies at an earlier stage of their development. After an average of six years of active involvement in the companies they invest in, private equity managers usually have the choice between three exit routes: i) selling to another private equity company (typically a larger firm); ii) selling to another business; or iii) listing of shares on the stock market through an IPO. As its decision to make an investment into a firm is determined in part by the potential exit route(s), the easier it is for a private equity fund manager to IPO a firm, the more willing it might be to invest into it in the first place. Simplifying requirements for listed companies could therefore have a positive effect on the entire financial ecosystem. Between 2010 and 2016, IPOs consistently formed only a small share of the number of companies divested by private equity fund managers (6.3 %) but a much larger share of the amount divested (15.7%). In other words, the IPO exit route was mostly used by private equity firms for the larger companies they owned and not for companies at the lower end of the spectrum. At the same time, even relatively larger companies supported by growth funds, such as scale-ups, were usually sold through trade sales (29% in amount during the same period) rather than through IPOs (9% in amount). In light of this, we would therefore like to use this opportunity to urge the Commission to strengthen the SME Growth Markets regime, extend its scope and allow more companies to benefit from it. Increasing the existing threshold to cover medium-sized companies, in the same spirit as the recent changes made to eligible undertakings under the EuVECA framework, would also allow larger scale-ups to have an easier access to European public markets, without disproportionately reducing investor protection. For example, in the United States, an emerging growth company is defined as any issuer that had total annual gross revenues of less than $1 billion during the five years following the IPO, at least 5 times higher than what is proposed under the existing MiFID framework. Furthermore, we believe there should be a transition exempting newly listed companies from certain requirements during the first few years of their listed life, in order to allow them to adapt more easily to their obligations. We therefore support other trade associations such as European Issuers calling for a 5-year transition period. We would also like to note that various information which has to be presented in the context of the Market Abuse Regulation (MAR) can create a high burden on smaller companies. These include the creation and maintenance of insider’s lists, market soundings record keeping requirements or the disclosure of person discharging managerial responsibilities (PDMR) transactions. While our view is that all companies on SME Growth Markets should be exempted from these provisions, we welcome any effort to simplify and/or clarify the existing rules.
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Response to Institutional investors' and asset managers' duties regarding sustainability

11 Dec 2017

Invest Europe supports the Commission’s (EC) work to ensure that material sustainability factors are assessed, consistently taken into account and disclosed by institutional investors and asset managers. However, it is crucial that an accepted definition of “sustainability” (eg Brundtland report) is used and the scope captures all aspects of sustainability (climate change, environment, social & governance). We should be careful not to favour certain components over others, thus creating distortions and new forms of unsustainable finance. There also needs to be clarity on what is meant by the concept of “material” sustainability. We would assume that this encompasses material business risks (eg sustainable supply chain risks) as well as material opportunities (eg new or disruptive sustainability services or technologies). Even disruptive/beneficial technologies can present material sustainability risks/opportunities that need to be understood and managed. We recognize the (fiduciary) duty of institutional investors and asset managers to incorporate sustainability factors in their investment decisions and monitoring as such factors may have a long-term impact on value creation and destruction and/or where beneficiaries on whose behalf the investor or manager is acting may have actively indicated that sustainability should be taken into account. It is important that sustainability is not only looked at in the context of non-financial factors: considering sustainability issues can be entirely consistent with the exercise of fiduciary duty. However, it is up to asset managers and asset owners (the two groups are not the same) to decide how they do it given that they might have different (responsible) investment approaches, clients (retail & institutional) and beneficiaries, and operate under different (national) legislation. They should be (made) transparent about their approach towards their clients and other stakeholders. Further thought should be given as to whether to pursue non-legislative or legislative action. Recognising that both options have merits, there are some issues that ought to be considered: 1) We believe that the EC’s work could be valuable so long as it is permissive (i.e. it clarifies that certain types of asset managers may take account of sustainability considerations as part of their fiduciary duties) and provides guidance (perhaps pointing to evidence that sustainability issues are likely to have an impact on long-term value); 2) Actual legislation if, ultimately, required will need to be carefully thought through to ensure it is fit for purpose, practical and workable within a private equity (PE) context. Hence, we welcome the EC's systemic approach and objective to understand both the individual & cumulative effects of any potential policy options; 3) As these are still relatively early days in the integration of sustainability in fiduciary duty, a legislative approach risks hard-wiring solutions that might not ultimately be the best. One single solution, disregarding the breadth/variety of practitioners, perspectives and market practices covered by the target audience, would not be appropriate. PE has a specific business model that makes it well suited to integrating and managing ESG matters (see the Professional Standards Handbook & other guidance in the Responsible Investment Bibliography). Especially in a broader context of a diversified portfolio, the EC should take account of the specific characteristics of different asset classes when potentially prescribing how to integrate sustainability in pre-investment and post-investment periods. Asset managers (and the financial sector more generally) cannot be expected to deliver a sustainable economy on its own. If tax & regulatory policies better reflect the full social costs of certain activities, then it will be much easier for asset managers to allocate resources in a way that is sustainable but they need those signals to come from public policy.
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Response to Reducing barriers to cross-border distribution of investment funds

14 Jul 2017

Private equity (PE) fund managers face various problems when they try to raise capital from non-domestic investors. They are subject to burdensome and complex regulatory requirements, whether arising from the transposition of the AIFMD or from national rules, which very often do not seem to be proportionate to the risk they pose or appropriate to the PE world. Therefore, Invest Europe welcomes the Commission’s initiative to reduce national regulatory barriers to the cross-border distribution of investment funds. Proportionate passport regimes alongside strong national private placement regimes are prerequisites to cross-border investment in the fund management space. Any type of manager, irrespective of its size and characteristics, should be able to raise capital cross-border from a wide range of investors without undue administrative burden and barriers to entry. This is essential to increase funding opportunities for all companies that are in need of finance, whatever their size and maturity. However, care will be needed to ensure that any proposed changes encourage, rather than limit, legitimate fundraising activity. While harmonisation and legal certainty are desirable, they must not take primacy over having a legal structure which is appropriate for the market it regulates. Any potential solutions should be tailored to the different structures and business models of the fund managers that will be captured by this initiative. For example, the AIFM and UCITS Directives cover very different markets with their own specificities, and even within the scope of the AIFMD are managers and funds with very different characteristics. Invest Europe agrees with the identified policy areas in the IIA, in particular: 1. Marketing: Being based inappropriately on the UCITS model – in which a standardised product is offered on a ‘take it or leave it’ basis to the retail market - the AIFMD fails to recognise that PE fundraising is a negotiated, iterative process in which managers and (potential) investors mutually determine the fund’s terms. This flaw is exacerbated by the significant divergences between Member State authorities on the question of when “marketing” begins for AIFMD purposes. For the AIFMD framework to work in the PE context, it is key that the manager can “pre-market” a fund without such activities being considered as “marketing” under the AIFMD. Pre-marketing involves approaching prospective investors to gauge possible investor interest prior to obtaining regulatory authorisation to market the fund. Marketing should only be deemed to take place once subscription documents are provided to investors, reflecting the fact that no offer can exist prior to that point. 2. Regulatory fees: A fund manager that is compliant with relevant EU law and is in possession of a valid passport should be free to market across the EU without any additional requirements being imposed by host jurisdictions, including fees and charges. There is no justification under the AIFMD for such restrictions and we are concerned about the long-term adverse impacts this may have on market participants’ behaviour and the operation of the single market. Finally, we believe that: 1. given the current options provided under applicable EU regimes are often not sufficient, there remains a strong case for developing a (voluntary) pan-European passporting regime for sub-threshold fund managers regardless of whether they manage venture capital or growth/expansion funds. This should be appropriately tailored and with proportionate regulatory obligations; 2. the “professional investor” definition in AIFMD, being based on MiFID, is insufficiently tailored for the nature of the PE asset class and the diversity of financial investors. The creation of a new category or definition of “semi-professional” investor, based on the level of (industry or sector) experience and/or the level of wealth would provide appropriate flexibility without weakening investor protection.
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Response to Revision of the EU SME Definition

6 Jul 2017

Invest Europe would welcome a revision of the SME definition. We believe it should be clear that firms backed by private equity and venture capital investors do not, solely by virtue of that ownership form, fall outside the definition of an SME. 83% of companies backed by private equity and venture capital are SMEs, and these investors add significant value. Currently - and despite the clear objective of carving out venture capital activities as set out in Article 3.2 of the Annex to the Definition - SMEs backed by these managers often fall outside this definition. The current provisions in Article 3.3 ultimately lead to situations where all companies in which a venture capital manager will have invested are treated as “linked enterprises”, and all will as a result fail to qualify as SMEs. In other cases, due to the uncertainty caused by the current definitions, companies backed by private equity which could claim the SME status are not able to do so. We believe this goes against the spirit of the SME definition as it does not distinguish between investments made by private equity and venture capital funds and typical corporate groups. This has the effect of undermining the Capital Markets Union objectives of developing equity investments in SMEs. While a manager of a private equity fund will in some cases exert influence over the SMEs it has invested in (for example through shareholder rights and investor consents), this does not extend to running the operations of its portfolio companies in the same way as a corporate trading group, either at an individual company level or across different portfolio companies in a fund. Ultimately, the manager’s goal is to grow these companies during a limited number of years of ownership (5-6 years on average), looking for real returns for investors into the fund. The manager will have no common strategy for all the companies in which it has invested. In practice, this materialises in the strict separation, including from an accounting perspective, between all the companies that are run by the manager. The presence of investment (and, in some limited cases, a controlling stake) from a private equity investor in a company that is by all objective measures a start-up, a scale-up or a medium-sized company should not automatically exclude it from being regarded as an SME in EU law. This company may still need and benefit from the tax and regulatory advantages at EU and national level as well as specific state aid treatment that the SME definition entails SMEs which are supported by private equity will, as any other SMEs, seek additional financing from third party providers to finance their growth or face unexpected situations. Current conditions effectively create an unlevel playing-field for SMEs backed by private equity as they are put at a clear competitive disadvantage compared to their counterparts. This has the effect of making this type of capital less attractive for the most innovative start-ups and scale-ups and ultimately exacerbates the equity gap the Commission is trying to fill in the context of the CMU. We therefore recommend that the European Commission clarify that SMEs backed by private equity and venture capital (including corporate venture capital), irrespective of their legal form, can still be considered as such by amending Article 3. Among the proposed objectives of the review, we also support the extension of the 2-year period during which scale-ups would maintain their SME status. Finally, regarding the Commission’s suggestion to look at sector-specific particularities, we note that the existing 250 employee limit may be a constraint for companies in the services sector. From our experience, companies active in this field may fairly rapidly reach 250 employees but remain ‘early stage’ from a financing and business development perspective.
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Response to Review of the appropriate prudential treatment for investment firms

19 Apr 2017

Invest Europe supports the principle of establishing a prudential regime better tailored to investment firms and welcomes initiatives to ensure the regime does not give rise to unnecessary complexity and disproportionate costs and requirements for firms which are small and do not conduct “bank-like activities”. However, we have a number of concerns about some of the EBA suggestions in its recent Discussion Paper*. The future regime will cover a large and heterogeneous group of investment firms, including a number of the private equity firms we represent. These managers do not carry out ‘bank-like’ activities and do not assume balance sheet risk, and include: i. adviser/arranger MiFID firms outside of the scope of CRD IV ii. AIFMs which obtained “top-up permissions” under Article 6.4 of AIFMD iii. MiFID firms with limited authorisations to provide investment services iv. a limited number of MiFID firms holding a “placing without a firm commitment” permission. If the new regime is not calibrated correctly for each of these types of firms, it is likely to lead to an increase in regulatory capital requirements, especially for those firms in point (i) above, currently subject to a fixed initial capital requirement of €50,000 in some EU MS. This will create barriers for them to operate in the market. In order to avoid this unintended outcome, the design of the future regime will have to recognise the specific features of these different firms and take into account the prudential concerns they raise in a granular way. It should not look at the assets under management or advice of a firm as a proxy for risk but at factors such as the type of advice given or the type of clients it is provided to. Future prudential requirements must acknowledge that the purpose of regulatory capital and liquidity requirements for investment firms is to facilitate an orderly wind-down of the firm. The EBA’s proposals described in its Discussion Paper represent a fundamental change to current practice as they suggest that regulatory capital is for the continuity of the firm on a going concern basis and to address contingent legal and regulatory risk. Advisory firms are easily substitutable and their failure would not prejudice investors in the funds they manage. The same is true of private equity fund managers. The funds managed or advised are typically closed-ended and this also ensures an orderly transition to another manager/adviser. The nature of the underlying assets of the fund is important – unlisted businesses would still continue to operate. The existence of a professional indemnity insurance should be taken into account, as it provides an alternative way of covering a firm’s potential liability to customers. All these factors need to be considered to identify the actual risks in the event of the failure of a non-bank investment firm, and the prudential treatment that would ensue. We do not believe that there will be any need to introduce a liquidity regime for investment firms which do not conduct banking activities. The basic solvency test should ensure that the firm has sufficient liquid assets to meet its liabilities as they fall due. If it is considered that an additional liquidity regime is appropriate, then this should be addressed by rules that require best practice in liquidity risk management, rather than any specific quantitative liquidity buffer. Finally, the amount of data collected by the EBA on private equity firms is likely to be insufficient. Our membership includes a large number of small firms and they do not always have the bandwidth to engage in the data collection exercise. We urge the Commission to exercise caution about this potential “small-firm” bias. Moreover, a more extensive consultation exercise would be recommended to determine how to calibrate the new regime. * For further details, please refer to our response to the EBA Discussion Paper attached to this contribution.
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Meeting with Manuel Nobre Goncalves (Cabinet of Commissioner Carlos Moedas)

24 Jan 2017 · Fund of Funds

Meeting with Jonathan Hill (Commissioner)

27 Nov 2015 · Round Table on Venture Capital

Meeting with Carlos Moedas (Commissioner)

3 Nov 2015 · Venture capital

Meeting with Jack Schickler (Cabinet of Commissioner Jonathan Hill)

9 Sept 2015 · Capital Markets Union

Meeting with Lee Foulger (Cabinet of Vice-President Valdis Dombrovskis)

19 May 2015 · Alternative Investment Fund Managers Directive

Meeting with Chantal Hughes (Cabinet of Commissioner Jonathan Hill)

21 Apr 2015 · Capital Markets Union

Meeting with Valérie Herzberg (Cabinet of Vice-President Jyrki Katainen)

27 Feb 2015 · Venture capital

Meeting with Carlos Moedas (Commissioner)

29 Jan 2015 · Contribution of venture capital to Research & Innovation

Meeting with Lee Foulger (Cabinet of Vice-President Valdis Dombrovskis)

8 Jan 2015 · CMU/Venture capital issues