As part of its ongoing push to professionalise the venture capital industry in Europe, the European Venture Capital & Private Equity Association (EVCA) launched the “Governing Principles and Sound Practice for the Establishment and Management of Private Equity and Venture Capital Funds” consultation document at its annual investors conference in Geneva in March.
Simon Thornton, investor relations at Landmark Partners and a member of EVCA’s investor relations committee, led the taskforce that produced the Governing Principle’s document and pointed to this latest initiative as one of many in the 20 year history of EVCA. In 1983, the year EVCA was formed, the association produced a code of conduct for its members, ten years later the first valuation guidelines appeared and in 2000 the first reporting guidelines were published. Publication of the second set of valuation guidelines followed in 2001.
Thornton noted that much of what appears in the Governing Principles document is in fact already common practice within the industry. The nine Governing Principles follow;
1 The Law – a fund operator should make sure the legal requirements are met in the jurisdiction of establishment of the fund and in each jurisdiction in which it operates and raises finance.
2 The contract – a fund operator should make sure the terms and conditions specified in the contracts between itself and its investors are met.
3 Integrity – a fund operator should manage its business with integrity.
4 Skill, care and diligence – a fund operator should manage the fund with due skill, care and diligence.
5 Adequacy of resources – a fund operator should ensure an adequate level of financial and operational resources for the management of the fund.
6 Investors’ interests – a fund operator should pay due regard to the interests of investors in the fund taken as a group.
7 Transparency – a fund operator should pay due regard to the information needs of investors in the fund, and communicate adequate information to them in a way which is clear, fair and not misleading.
8 Conflict of interests – a fund operator should seek to manage conflicts of interests fairly, both between itself and investors in the fund and between different funds and different investors and groups of investors.
9 Investors’ assets – a fund operator should arrange adequate protection for investors’ assets.