The New EuVECA Conflict of Interest Rules

Published 22 May 2019


On 22 May 2019, the European Commission’s proposed delegated regulation supplementing the EuVECA Regulation was published in the Official Journal of the EU. It clarifies the conflicts of interest rules governing EuVECA managers and what measures to be taken by EuVECA managers to detect, prevent and control conflicts of interest.


Under the current EuVECA Regulation, EuVECA managers shall identify and avoid conflicts of interest and where they cannot be avoided, manage and monitor and disclose promptly those conflicts of interest in order to prevent them from adversely affecting the interests of the EuVECA funds and its investors and to ensure that the managed EuVECA funds are fairly treated.

The proposed delegated regulation develops and clarifies the EuVECA conflict of interest rules, including the following highlights:

  • Types of conflicts of interest
  • Conflicts of interest policy requirements
  • Procedures and measures to prevent, manage and monitor conflicts of interest
  • Management of consequences of conflicts of interest
  • Strategies for the exercise of voting rights to prevent conflicts of interest
  • Disclosure of conflicts of interest

Types of conflicts of interest

The delegated regulation specifies the various types of conflicts of interest. The relevant persons (a Relevant Person) eligible for conflicts of interest are

  • an EuVECA manager
  • a person who effectively conducts the business of that EuVECA manager
  • a person who controls or is controlled by that EuVECA manager,
  • an employee, or
  • any person who controls or is controlled by that EuVECA manager, by another qualifying venture capital fund or collective investment undertaking managed by the same EuVECA manager, or the investor therein.

The delegated regulation identifies a number of conflicts of interest, including situations where a Relevant Person

  • is likely to make a financial gain, or avoid a financial loss, at the expense of the qualifying venture fund or its investors;
  • has an interest in the outcome of a service provided to, or a transaction carried out on the behalf of, the qualifying venture fund or its investors which is distinct from the interest of the qualifying venture fund or its investors;
  • has an incentive to favour that favours particular interests at the expense of the EuVECA fund or the investors’ interests

Conflicts of interest policy and procedures

EuVECA managers shall adopt a written conflicts of interest policy that is appropriate to the nature, scale and complexity of the EuVECA managers’ business. The policy shall identify the circumstances that may give rise to a conflict of interest and shall amongst others include the following steps:

  • prohibition of exchange of information between Relevant Persons if this could lead to a conflict of interest
  • separation of the supervision of Relevant Persons
  • prevention or control of the involvement of Relevant Persons in any activity that may lead to a conflict of interest

In case the measures and procedures are insufficient to prevent the risks of damage to the interests of the EuVECA fund or its investors, EuVECA managers shall (a) promptly inform senior management of the EuVECA fund of the risk of damage, and (b) take action to ensure that the EuVECA manager acts in the best interest of the EuVECA fund or its investors.

Strategies for exercising voting rights

As EuVECA managers may be active in the management of the EuVECA fund’s portfolio companies, EuVECA managers shall develop adequate and effective strategies to ensure that such EuVECA managers’ voting rights are exercised for the benefit of both the EuVECA fund concerned and its investors. The strategies shall include certain minimum requirements, and the EuVECA managers shall upon request from investors provide a summary of those strategies and the actions taken.

Disclosure requirements

EuVECA managers shall on a durable medium disclose information of any identified conflicts of interest  to  the  investors  before  undertaking  business  on  their  behalf. EuVECA managers may provide the information by means of a website, without addressing that information personally to the investor, provided that

  • the investors have been notified of the website address and where the information can be accessed
  • the investors have consented that the information is provided through the website and
  • the information is continuously accessible on the website for such period of time as the investors may reasonably need to access it.
Our Comments

Conflict of interest regulation is generally a topic of substantial investor focus. While most limited partnership agreements thus already include detailed regulation on conflicts of interest, EuVECA managers should ensure that any existing procedures and measures are sufficient to identify, prevent, manage and monitor conflicts of interest in compliance with the minimum requirements set out in the delegated regulation.

Next Steps

The delegated regulation comes into force on 11 June 2019, and EuVECA managers shall adapt to the new requirements by 11 December 2019.

Find the delegated regulation here.