The European Private Equity and Venture Capital Association (EVCA) has launched new corporate governance and best practice guidelines for the management of privately held companies. These have been designed to address aspects of corporate governance specific to the private equity industry and its business model.
The guidelines are the culmination of standards to cover the conduct of private equity and venture capital fund managers in respect of the management of their activities and their relationships with investors and portfolio companies.
The guidelines were developed by the EVCA corporate governance working group, which involved industry
practitioners, advisers and other stakeholders with European and international perspectives. A stakeholder and public consultation period was held from autumn 2004 to spring 2005.
“These guidelines offer a framework to be used by practitioners to ensure best practice in all aspects of investing and supporting companies. They are another example of the ongoing process of self-regulation and professionalism within our industry,” said Herman Daems, outgoing EVCA chairman.
“The success and growth seen in private equity is predicated on funds being close to the companies they invest in. Good governance needs to move up the list of what limited partner due diligence is looking for,” said Vincent Neate, a director of KPMG and rapporteur of EVCA’s corporate governance working group.
Included in the guidelines are recommendations for principles of investment conduct, including the need for confidentiality and the requirement to respect the needs of all stakeholders in a business; principles of conduct for private equity and venture capital managers as shareholders in portfolio companies; recommendations of conduct for private equity professionals as board members of portfolio companies; and guidelines for the management of portfolio companies.