French Monetary and Financial Code
In forceI. - At least 50% of the assets of a fonds commun de placement à risques must be made up of non-trading securities, equity securities or securities giving access to the capital of companies, which are not admitted to trading on a French or foreign financial instruments market operated by a market undertaking or an investment services provider other than a portfolio management company or any other similar foreign body, or, by way of derogation from article L. 214-24-34, shares in limited liability companies or companies with equivalent status in the country in which they have their registered office.
II. - The assets may also include :
1° Up to a limit of 15%, current account advances granted, for the duration of the investment, to companies in which the fund holds at least 5% of the capital. These advances are taken into account when calculating the quota stipulated in I, when they are granted to companies that meet the conditions for inclusion in this quota;
2° Rights representing a financial investment in an entity incorporated in a Member State of the Organisation for Economic Co-operation and Development whose main purpose is to invest in companies whose equity securities are not admitted to trading on a market referred to in I. These rights are included in the fund's 50% investment quota only up to the percentage of direct investment of the assets of the entity concerned in companies eligible for this same quota.
III. - The following are also eligible for the investment quota stipulated in I, up to a limit of 20% of the fund's assets:
1° Equity securities, or securities giving access to capital, admitted to trading on a market mentioned in I of a Member State of the European Union or another State party to the Agreement on the European Economic Area, issued by companies with a market capitalisation of less than 150 million euros. Market capitalisation is assessed on the basis of the average opening price over the sixty trading days preceding that of the investment. A decree issued by the Conseil d'Etat will determine how this valuation is to be applied, particularly in the case of initial listings or corporate restructuring operations;
2° Debt securities, other than those mentioned in the said I, issued by companies whose equity securities are not admitted to trading on a French or foreign financial instruments market operated by a market undertaking or an investment services provider other than a portfolio management company or any other similar foreign body, or debt securities issued by limited liability companies or companies with equivalent status in the State in which they have their registered office, or claims on these entities.
IV. - When the securities of a company held by a fonds commun de placement à risques are admitted to trading on a French or foreign financial instruments market operated by a market undertaking or an investment services provider other than a portfolio management company or any other similar foreign body, they continue to count towards the 50% investment quota for a period of five years from their admission. However, the five-year period does not apply if the securities of the company admitted to listing meet the conditions of III on the date of listing and if the fund complies with the 20% limit mentioned in III, taking these securities into account.
V. - The 50% investment quota must be complied with no later than the closing inventory for the financial year following the financial year in which the venture capital investment fund was set up and until the close of the fund's fifth financial year.
VI. - A decree of the Conseil d'Etat lays down the procedures for applying the quota provided for in V where the fund makes additional capital calls or new subscriptions. It shall also lay down the rules for assessing the quota as well as the specific rules relating to the conditions of acquisition and disposal as well as the limits on the holding of assets.
VII. - Unitholders may not request the redemption of their units before the expiry of a period which may not exceed ten years. At the end of this period, unitholders may demand the liquidation of the fund if their redemption requests have not been satisfied within one year.
VIII. - Units may give rise to different rights to the net assets or income of the fund under the conditions laid down in the fund rules. Units may also be differentiated in accordance with the provisions of the second paragraph of article L. 214-24-25.
IX. - The rules of a fonds commun de placement à risques may provide for one or more fixed-term subscription periods. The management company may only distribute a portion of the assets on expiry of the last subscription period and in accordance with the conditions laid down by decree.
X. - Units in a fonds commun de placement à risques may be sold as soon as they have been subscribed. If the units have not been fully paid up, the subscriber and successive transferees are jointly and severally liable for the unpaid amount. If the unitholder fails to pay up the sums outstanding on the units held at the times set by the Management Company, the Management Company will send the unitholder formal notice. One month after this formal notice has been served, and if it has remained without effect, the Management Company may proceed, without any judicial authorisation, to sell these units. However, a subscriber or transferee who has sold his units shall cease to be liable for any payments not yet called up by the Management Company, two years after the transfer of the sold units from one account to another.
XI. - The fund regulations may stipulate that when the fund is liquidated, a portion of the assets shall be allocated to the management company in accordance with the conditions laid down by decree of the Conseil d'Etat.
XII. - A fonds commun de placement à risques which includes in its assets at least 5% of liquid financial instruments as defined by decree of the Conseil d'Etat may mention this fact in all deeds and documents intended for third parties.
