A THOROUGH UNDERSTANDING OF PRIVATE EQUITY

RETOUR SOMMAIRE

A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2010

MAIN ACTORS AND STRUCTURES

2.2.2

France

France provides several types of suitable domestic fund structures for venture capital, as well as fiscal incentives to encourage investments in the asset class: • The FCPR (“Fonds Commun de Placement à Risques”) is the most commonly used struc- ture for private equity funds in France (in 2008, 85% of the private equity capital raised in France was collected through these funds). This vehicle is tax transparent for domestic and non-domestic LPs, and offers (by law) non-domestic LPs the ability to avoid having a permanent establishment in the country. FCPRs can be authorised funds (“FCPR agréés”), funds registered via the fast-track procedure (“FCPR allégés”) or contractual funds (“FCPR contractuels”). Contractual FCPRs, inspired by the Anglo-Saxon limited partnerships, have been recently introduced. These vehicles have fewer regulatory constraints than usual FCPRs and are for qualified investors and accredited investors only 39 . • The FCPI (“Fonds Commun de Placement dans l’Innovation”) is a kind of authorised FCPR fund dedicated to investments in innovation. • The FIP (“Fonds d’Investissement de Proximité”) is a kind of authorised FCPR fund dedi- cated to local or regional investments. The main features of these vehicles are summed up in the table hereafter:

Figure 26 – Comparison of the French private equity structures

FCPR

FCPI

FIP

Financial and Monetary Code, Articles L214-36 to 38 Mutual fund (almost always UCITS) > Authorised FCPR: Public > Contractual FCPR & FCPR “allégé“: Well-informed Risk capital: Min 50% of the assets (except contractual funds)

Financial and Monetary Code, Article L214-41

Financial and Monetary Code, Article L214-41-1

Applicable legislation

Mutual fund (almost always UCITS) Mutual fund (almost always UCITS)

Legal structure

Public

Public

Eligible investors

Risk capital: Min 60% of the assets Investment only in innovating firms

Risk capital: Min 60% of the assets Investment only in firms located in a selected geographical zone

Eligible assets and risk diversification requirement

Borrowing restrictions Max 10% of the net assets (except contractual funds)

Max 10% of the net assets

Max 10% of the net assets

E 400,000

E 400,000

E 400,000

Minimum capital requirement Regulated structure Yes/No

Yes

Yes

> Authorised FCPR: Yes > Contractual FCPR & FCPR “allégé“: Declaration procedure to AMF only

AMF

AMF

AMF

Supervisory Authority

487 as at 31/12/2009

264 as at 31/12/2009

153 as at 31/12/2009

Number of structures recorded by the Supervisory Authority

Conditions to qualify for favourable tax treatment (individual investors): At least 60% of the assets of the FIP must be invested in EEA non- listed companies, which must be located in at the most three different geographical regions (in France or in the EEA). This qualifying portfolio must invest at least 10% of its assets in newly created companies. These qualifying assets can include listed companies with a market capitalisation of less than E 150 million but only up to 20% of the total assets.

Conditions to qualify for favourable tax treatment (individual investors): At least 60% of the assets of the FCPI must be invested in innovative companies established in the European Economic Area (EEA) and subject to local corporate income tax. These qualifying assets can include listed companies with a market capitalisation of less than E 150 million but only up to 20% of the total assets.

Tax regime

Conditions to qualify for favourable tax treatment (individual investors): At least 50% of the assets of an FCPR must be invested in non-listed resident companies (French or foreign) that carry out operational activities and are subject to local corporate income tax. These qualifying assets can include listed companies with a market capitalisation of less than E 150 million but only up to 20% of the total assets.

39 Source: Practical Law Company, “Private equity 2009 Volume 2: Venture Capital”, 2009

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