Tag Archives: SMEs

Removing obstacles to cross-border investments by venture capital funds

Removing obstacles to cross-border investments by venture capital funds

Outline of the Community (European Union) legislation about Removing obstacles to cross-border investments by venture capital funds

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Single market for capital

Removing obstacles to cross-border investments by venture capital funds

Document or Iniciative

Communication from the Commission of 21 December 2007 to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions – Removing obstacles to cross-border investments by venture capital funds [COM(2007) 853 final – Non published in the Official Journal].

Summary

In this Communication, the European Commission identifies measures to encourage increased cross-border venture capital investment and fundraising in the Internal Market.

Venture capital funds are an essential form of capital for SMEs in their early stages and those with high-growth potential, a driver of the economy

Venture capital has been identified as an important form of capital for SMEs which experience problems in accessing finance, in spite of their importance for continued economic growth. It presents considerable potential for the growth of innovative SMEs. Companies backed by venture capital tend towards considerable job creation and increased research and development. They contribute to economic growth and environmental sustainability, in the form of venture capital fund investments. However, venture capital markets are currently split along national lines throughout the European Union (EU), which adversely affects both fundraising and investment.

Setting up framework conditions and removing existing barriers

Deficiencies in framework conditions and barriers in the Internal Market are hampering venture capital mobility. In this Communication, the Commission identifies various conditions, at both national and Community level, to overcome current barriers and encourage increased cross-border venture capital investment and fundraising.
Framework conditions to be put in place include:

  • developing domestic policies such as public co-funding;
  • providing targeted horizontal state aid for new innovative enterprises;
  • favouring liquid exit markets in the EU, in particular growth stock markets;
  • facilitating the development of supporting clusters to generate new ideas and entrepreneurs. Furthermore, existing Community programmes aim to encourage innovation and entrepreneurs in the context of the renewed Lisbon Strategy for Growth and Jobs, for example:
  • the Seventh Framework Programme (FP7) which aims to boost funding for collaborative research in Europe during the 2007-2013 period;
  • the Competitiveness and Innovation Programme (CIP), of which €1.1 billion has been allocated to improving access to finance for SMEs, also between 2007 and 2013;
  • in the context of JEREMIE (Joint European Resources for Micro to Medium Enterprises), Member States, if they choose it, will be able to use part of their structural funds to support SMEs.

Establishing incentives to increase private sector investment

Policies alone will not be enough, and more investment through private channels is essential. For this to happen, the Commission and Member States need to work together in order to improve the framework conditions for venture capital funds, such as facilitating cross-border operations:

  • creating an integrated financial market to ease the free movement of venture capital;
  • improving conditions for fundraising by institutional investors by extending the ‘prudent person rule’ and analysing possibilities for setting up a European private placement regime;
  • improving the regulatory framework for venture capital funds by reviewing existing legislation and adopting new laws, for greater efficiency and less administrative obstacles for investors;
  • reducing tax obstacles – simplifying the current varied, complicated national fund structures and; avoiding double taxation – the Commission has set up a working group to this end;
  • mutual recognition of existing national frameworks as the most pragmatic short term approach.

The Commission advocates an exchange of good practices at all levels. It encourages cooperation through a partnership approach between the Member States, the Commission and the industry itself. This is essential for implementing these policies and developing the venture capital market.

Context

Venture capital market development varies across Member States national policies and frameworks differ between the Member States, which hinders fundraising and investment between countries. The result is that cross-border venture capital investment is complicated and thus smaller funds tend to operate only within their own jurisdiction’.

Related Acts

Communication from the Commission of 29 June 2006 to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions – Implementing the Community Lisbon Programme: Financing SME Growth – Adding European Value [ – Non published in the Official Journal].

The European Commission outlines a set of measures to help innovative SMEs by improving accesss to finance, including cross-border investments in venture capital, both at EU and Member state levels.

Transfer of businesses

Transfer of businesses

Outline of the Community (European Union) legislation about Transfer of businesses

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Enterprise > Business environment

Transfer of businesses

Document or Iniciative

Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions of 14 March 2006 – Implementing the Lisbon Community Programme for Growth and Jobs – Transfer of Businesses – Continuity through a new beginning [COM (2006) 117 final – Not published in the Official Journal].

Summary

When a business owner retires, his business all too often comes to an end. Owing to legal, fiscal and psychological difficulties, many transfers of thriving businesses fail. It is not easy to find a successor, especially as businesses are now generally transferred to third parties rather than to a family member. Furthermore, most Europeans prefer to be employed, and entrepreneurs are more interested in creating than in taking over a business.

Yet taking on an existing business offers many advantages (an established production structure, a client network, know-how, business reputation, etc.). A successful business transfer also benefits European growth and, consequently, plays a crucial role in the Lisbon Strategy. For instance, existing businesses provide five jobs on average for every two provided by a new business.

The transfer of businesses is a practice which will gain ground over the next decade, with one third of business owners in the EU retiring over the next ten years. It is estimated that 690 000 small and medium-sized enterprises (SME) and 2.8 million jobs will be affected each year. It is therefore essential to create suitable conditions for transfers of businesses.

In order to do this, the Commission is proposing a number of improvements to the Member States, including:

  • More sustained political attention to transfers

The Member States should systematically promote the transfer of businesses as an alternative to business creation. They should, for instance, consider introducing support measures for transfers similar to those available for business creation.

  • Awareness-raising among stakeholders

At present, insufficient effort is made to raise awareness. Only half of the Member States have taken relevant action. Like retiring business owners, potential new entrepreneurs should receive special attention because taking over an existing business often offers an interesting alternative to creating one. The Commission therefore recommends more action to raise awareness among business owners, for example through chambers of commerce and other points of contact such as tax advisers, accountants or banks, of the need to plan transfers sufficiently in advance. The Commission also calls on the Member States to encourage mentoring systems with a view to assisting business owners at the time of transfer. Lastly, the Member States should envisage direct approaches to raising awareness among business owners, such as sending letters to business owners over a given age.

  • Making it easier to change the legal status of a business

Succession contracts, partnership agreements, the establishment of limited liability companies and restructuring are all legal tools which can be used to prevent business closure. For example, the succession contract, which is prohibited in many countries, the partnership agreement or the establishment of limited liability companies make it possible to ensure business continuity in the event of the owner’s or an associate’s death. When changing legal status, a business about to be transferred can undergo legal restructuring in order to avoid liquidation.

  • Improved financing of transfers

The financial environment is rarely favourable for transfers of businesses. Indeed, transferring a business leads to a number of difficulties. First, it requires more capital than business creation, but the financial facilities designed for creating businesses often prove insufficient for transfers. Secondly, banks often consider financing transfers to be too costly and too risky, particularly for small businesses. Lastly, it is sometimes difficult to find a financial solution on time, as such a solution often takes the form of a combination of equity and loan. The Commission therefore recommends that the Member States provide suitable financial conditions such as start-up aid, loans and guarantees. Guarantees for equity in SMEs should include investments of local or regional funds to supply the initial and/or start-up capital, and mezzanine financing (a combination of equity and debt capital).

  • Tax incentives for business transfers

Although transfers within families have been made easier in many countries, transfers to third parties must receive greater encouragement through exemptions from tax on income generated by the sale of a business, specific tax relief on income reinvested in another business or used to finance the retirement of the business owner, or tax exemptions for employees investing in their own business.

  • Transparent markets for business transfers

The provision of impartial services to act as mediators between potential buyers and sellers should make it possible to organise transparent markets for business transfers. In some countries, the chambers of commerce take on this responsibility.

In order to implement all of these recommendations, a support infrastructure needs to be created to reach the hundreds of thousands of businesses which will be affected by a transfer over the next few years. This implementation infrastructure will make use of the Member States, their national, regional and local administrations, and business support organisations. It will involve in particular the dissemination of information to those providing support, the training of trainers and the development of teaching material.

Background

In 1994, the Commission published a Recommendation on the transfer of SMEs. This notice assesses the implementation of the 1994 Recommendation.

Corporate social responsibility: a business contribution to sustainable development.

Corporate social responsibility: a business contribution to sustainable development.

Outline of the Community (European Union) legislation about Corporate social responsibility: a business contribution to sustainable development.

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Employment and social policy > Employment rights and work organisation

Corporate social responsibility: a business contribution to sustainable development.

Document or Iniciative

Communication from the European Commission of 2 July 2002 concerning Corporate Social Responsibility: A business contribution to Sustainable Development [COM (2002) 347 final – Not published in the Official Journal].

Summary

The Commission presents a European strategy to promote corporate social responsibility (CSR). CSR involves companies integrating social and environmental objectives in their business operations and in their interaction with the actors concerned.

The Commission emphasises that the CSR programmes contribute to the sustainable development of the European Union (EU). In addition, they have a positive impact on the management and competitiveness of enterprises, considering in particular:

  • the globalisation of trade, which means that enterprises have activities and responsibilities abroad, including in developing countries;
  • consumer awareness regarding the image and reputation of enterprises;
  • financial institutions and investors taking into account the CSR activities of enterprises in order to evaluate the success and risk factors inherent in a company;
  • the possibility of using CSR activities to develop the skills of employees.

Principles of the European strategy

The strategy to promote CSR proposed by the Commission is based on a series of principles:

  • the voluntary, transparent and credible nature of CSR activities;
  • the identification of areas where European action will add value;
  • a balance between the actions taken in the economic, social and environmental spheres and in relation to consumers’ interests;
  • attention to the specific needs of Small and Medium-sized Enterprises (SMEs);
  • compatibility with existing international agreements and instruments (particularly those of the International Labour Organisation (ILO) and the Organisation for Economic Cooperation and Development (OECD)).

Key actions of the European strategy

Firstly, the Commission encourages developing knowledge on the impact of CSR on the economic performance of enterprises. It therefore proposes to launch studies into activities to raise awareness and disseminate information.

The exchange of good practice between businesses and between Member States must also be encouraged through the networking and coordination of actors.

The skills in enterprises must be supported, in particular by using European funding to train employees. In addition, the principles of CSR must be integrated into management training programmes in enterprises.

SME’s capacity for action must be strengthened by taking into account their specific characteristics and their limited resources. The Commission therefore encourages the exchange and dissemination of good practice, SME associations, cooperation between large companies and SMEs, and awareness-raising campaigns.

The transparency of CSR practices and tools must be guaranteed. The Commission therefore encourages the adoption of:

  • codes of conduct (concerning workers’ rights, human rights, protection of the environment, etc.);
  • management standards (in order to integrate social and environmental aspects into the day-to-day activities of enterprises);
  • instruments for measuring performance (such as internal evaluation reports);
  • labels on products;
  • standards for Socially Responsible Investment (SRI), in order to direct investors towards enterprises in the light of their CSR results.

The creation of a European forum could be of benefit to all the parties involved in CSR activities. It should be a place for exchanging experiences, cooperation and identifying areas where European action is required. In the first instance, the Commission invites the forum to look at:

  • the link between CSR and the competitiveness of enterprises;
  • the contribution of CSR to sustainable development, including in third countries;
  • issues specific to SMEs;
  • the effectiveness of existing codes of conduct;
  • guidelines and common criteria for evaluating CSR activities;
  • labelling programmes;
  • the dissemination of information on Socially Responsible Investment policies.

Lastly, the Commission proposes to integrate the objectives of CSR into all European policies. In accordance with its strategy to promote sustainable development, the EU has undertaken to integrate economic, social and environmental considerations into its policies. In addition, the CSR principles are particularly relevant in the following European policies:

  • employment and social affairs policy, particularly in the fields of education, training, equal opportunities and the integration of people with disabilities, the anticipation of industrial change and the restructuring of enterprises;
  • environmental policy, through evaluating environmental results, ecotechnology, and the environmental effectiveness of products (i.e. the link between the quantity of products and their impact on the environment);
  • consumer policy, in particular with regard to raising consumer awareness of social and environmental standards;
  • public procurement policy, in order to include social and environmental criteria in public procurement procedures;
  • external trade, external relations, and development policies, including with respect to multi-national enterprises;
  • public administration policy, given that the European institutions are also committed to implementing the CSR principles.

Context

This Communication follows on from the Green Paper on CSR published in 2001.


Another Normative about Corporate social responsibility: a business contribution to sustainable development.

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic

Enterprise > Business environment

Corporate social responsibility: a business contribution to sustainable development.

Document or Iniciative

Communication from the European Commission of 2 July 2002 concerning Corporate Social Responsibility: A business contribution to Sustainable Development [COM (2002) 347 final – Not published in the Official Journal].

Summary

The Commission presents a European strategy to promote corporate social responsibility (CSR). CSR involves companies integrating social and environmental objectives in their business operations and in their interaction with the actors concerned.

The Commission emphasises that the CSR programmes contribute to the sustainable development of the European Union (EU). In addition, they have a positive impact on the management and competitiveness of enterprises, considering in particular:

  • the globalisation of trade, which means that enterprises have activities and responsibilities abroad, including in developing countries;
  • consumer awareness regarding the image and reputation of enterprises;
  • financial institutions and investors taking into account the CSR activities of enterprises in order to evaluate the success and risk factors inherent in a company;
  • the possibility of using CSR activities to develop the skills of employees.

Principles of the European strategy

The strategy to promote CSR proposed by the Commission is based on a series of principles:

  • the voluntary, transparent and credible nature of CSR activities;
  • the identification of areas where European action will add value;
  • a balance between the actions taken in the economic, social and environmental spheres and in relation to consumers’ interests;
  • attention to the specific needs of Small and Medium-sized Enterprises (SMEs);
  • compatibility with existing international agreements and instruments (particularly those of the International Labour Organisation (ILO) and the Organisation for Economic Cooperation and Development (OECD)).

Key actions of the European strategy

Firstly, the Commission encourages developing knowledge on the impact of CSR on the economic performance of enterprises. It therefore proposes to launch studies into activities to raise awareness and disseminate information.

The exchange of good practice between businesses and between Member States must also be encouraged through the networking and coordination of actors.

The skills in enterprises must be supported, in particular by using European funding to train employees. In addition, the principles of CSR must be integrated into management training programmes in enterprises.

SME’s capacity for action must be strengthened by taking into account their specific characteristics and their limited resources. The Commission therefore encourages the exchange and dissemination of good practice, SME associations, cooperation between large companies and SMEs, and awareness-raising campaigns.

The transparency of CSR practices and tools must be guaranteed. The Commission therefore encourages the adoption of:

  • codes of conduct (concerning workers’ rights, human rights, protection of the environment, etc.);
  • management standards (in order to integrate social and environmental aspects into the day-to-day activities of enterprises);
  • instruments for measuring performance (such as internal evaluation reports);
  • labels on products;
  • standards for Socially Responsible Investment (SRI), in order to direct investors towards enterprises in the light of their CSR results.

The creation of a European forum could be of benefit to all the parties involved in CSR activities. It should be a place for exchanging experiences, cooperation and identifying areas where European action is required. In the first instance, the Commission invites the forum to look at:

  • the link between CSR and the competitiveness of enterprises;
  • the contribution of CSR to sustainable development, including in third countries;
  • issues specific to SMEs;
  • the effectiveness of existing codes of conduct;
  • guidelines and common criteria for evaluating CSR activities;
  • labelling programmes;
  • the dissemination of information on Socially Responsible Investment policies.

Lastly, the Commission proposes to integrate the objectives of CSR into all European policies. In accordance with its strategy to promote sustainable development, the EU has undertaken to integrate economic, social and environmental considerations into its policies. In addition, the CSR principles are particularly relevant in the following European policies:

  • employment and social affairs policy, particularly in the fields of education, training, equal opportunities and the integration of people with disabilities, the anticipation of industrial change and the restructuring of enterprises;
  • environmental policy, through evaluating environmental results, ecotechnology, and the environmental effectiveness of products (i.e. the link between the quantity of products and their impact on the environment);
  • consumer policy, in particular with regard to raising consumer awareness of social and environmental standards;
  • public procurement policy, in order to include social and environmental criteria in public procurement procedures;
  • external trade, external relations, and development policies, including with respect to multi-national enterprises;
  • public administration policy, given that the European institutions are also committed to implementing the CSR principles.

Context

This Communication follows on from the Green Paper on CSR published in 2001.