There has, for a number of years, been a feeling within the European venture capital community that the regulatory environment within the European Union (“EU”) is not optimally configured to foster specialised equity investment focused on innovative start-up companies. This dissatisfaction has manifested itself across a plethora of industry and governmental papers and consultations, the most significant recent example being the European Venture Capital Association’s (“EVCA”) White Paper of March 2010. One of the White Paper’s principal propositions was that the industry’s failure to develop as hoped is closely linked to the fragmentation of the regulatory operating environment across the 27 member states of the EU.

The European Commission’s (the Commission) response to the clamour for reform came on 15 June 2011, when it published a consultation document entitled A New Regime for European Venture Capital (“the Paper”). In this DechertOnPoint article we explore the centrepiece policy option, set out in the Paper, which is mutual recognition and passporting of venture capital funds throughout the EU.