A ministerial order refering to Venture Capital Fund (VCF) has just been published, which is expected to fostering new opportunities to finance local startups through Venture Capital Funds.
With the inauguration on November 8th, 2017 by H.S.H. the Sovereign Prince Albert II, Jean Castellini, and Xavier Niel of MonacoTech, identity founded in partnership between Monaco Telecom, Xavier Niel and the Monegasque State, the Principality was laying the first foundation stone of which should “develop new economic activities and support a transition to the industry of tomorrow.”
It is undeniable that this incubator/accelerator has quickly became an essential element, a locomotive, of the development of the innovation in Monaco. Start-ups are offered a welcoming social environment and quality mentoring. There was one more step to achieve in order to turn these startups into unicorns (technology companies under 10 years old valued at more than a billion dollars). An essential step for the development phase which is the “financing.”
However, the financing of innovation is mainly business angels and venture capital funds;” but the Monegasque ecosystem did not yet have the private funds to support the ” transformation of the Monegasque economy through digital technology,” of which the Sovereign is calling for.
There were also an increasingly obvious risk, to use the railway metaphor, that the locomotive leaves the station (home of innovative start-ups at MonacoTech) without hanging up the cars (financing innovation). And as a result, innovation has no choice but to leave the Principality to benefit from private or public funding (european subsidies).
A response to this problem was provided by the recently published Ministerial Order 2020-71 of 29 January 2020on Venture Capital Funds (VCF).
This order amends the reporting file of funds under Article 67 of Sovereign Order 1.285 of September 10, 2007 and imposes for the VCF, that company (which must have its headquarters in the Principality cf Art.1 O.S. 1.285) and the custodian be co-founders and that they have a minimum amount of 300,000 euros.
These new venture capital funds will be able to adopt the form of venture funds sub-funds/master funds/funds reserved for private person or legal entity and their assets will have to be at least consituted of 50% of listed shares. In addition, they will be able to make advances in current account to the companies under their portfolio and have a leverage effect.
The fund management companies will also be able, in accordance with the custodian, either to transfer all or part of the assets included in the fund to another venture capital fund, or to split the fund in two or several other venture capital funds.
This new regime will give the necessary oxygen to the Monegasque startup and innovation ecosystem. If it remains a certain questioning about necessity to imposing that the founders of these funds include a “custodian” when the objective of these VCF is to invest in unlisted entities, to finance them with “current account advances”, placing them out of the field of the traditional action of the financial custodians, it is undeniable that this first wagon is hung, and that others will follow quickly. We are thinking in particular of key law projects around (i) Simplified Equity Companies Act, or (ii) the repeal of the ban on holding companies in their group.
The ecosystem of the new Monegasque economy is accelerating in order to develop its full potential, in line with the sovereign’s vision and the legitimate ambition of the Principality.
Article Damien Conce -Legal Manager Rosemont Consulting
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