How venture capital firms and closed-end investment managers work in Spain

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1. The law regulates venture capital entities, other closed-end collective investment entities, and the management companies that run them.
2. Venture capital entities (ECR) raise money from investors to take temporary stakes in unlisted companies that are neither real estate nor financial. They can be set up as companies (SCR) or funds (FCR) and are always managed by an authorized management company.
3. ECRs must keep at least 60% of their computable assets in stakes and participating loans of companies within their scope, and cannot invest more than 25% in a single company or more than 35% in one group.
4. The law creates the ECR-Pyme figure, which must invest at least 75% of its assets in small companies (fewer than 250 employees and annual assets of no more than €43 million or turnover of no more than €50 million), to finance companies at early stages.
5. Closed-end collective investment entities (EICC) raise capital from investors to invest it in all kinds of assets under a defined investment policy, and can take the form of companies (SICC) or funds (FICC).
6. Management companies (SGEIC) need authorization from the National Securities Market Commission, with minimum capital of €125,000 (€300,000 if self-managed), and must appoint a depositary for each entity they manage.
7. Shares or units of Spanish ECRs and EICCs are marketed only to professional investors, although they can also be sold to other investors who commit at least €100,000 and declare in writing that they are aware of the risks.
8. The National Securities Market Commission supervises and inspects these entities and sanctions violations: very serious offenses can bring fines of up to five times the profit obtained, revocation of authorization, or disqualification of directors.

Who it affects

• Professional and retail investors who want to invest in venture capital: Units can only be sold to them if they are professional investors, or if they commit €100,000 and sign that they know the risks.
• Small and medium-sized companies seeking funding: ECR-Pyme entities are designed to give them capital and advice at early stages.
• Management companies of investment entities: They must obtain CNMV authorization, meet capital and organization requirements, and answer for the entities they manage.
• Foreign managers and funds from the European Union: They can market in Spain to professional investors through a notification procedure, and Spanish managers can do the same across the EU.

Words worth knowing

Capital-riesgo (venture capital)

Money invested in unlisted companies in exchange for stakes, with the aim of selling them later at a profit.

Entidad de inversión colectiva de tipo cerrado (closed-end collective investment entity)

A fund or company that pools money from several investors to invest it, where investors only get their money back when the whole vehicle is wound up, not whenever they want.

Coeficiente obligatorio de inversión (mandatory investment ratio)

The minimum percentage of the entity's money that must be invested in the assets set by the law.

Préstamo participativo (participating loan)

A loan whose return depends on the profits or losses of the company receiving it.

CNMV (Comisión Nacional del Mercado de Valores)

The public body that authorizes, supervises and sanctions entities operating in Spanish financial markets.

It summarizes the law as published in the BOE. It is written by artificial intelligence and may contain mistakes: the official text is what counts. Read the official text · How we make summaries