FRANCE Law and Practice Contributed by: David-James Sebag, Donald Davy and Marie-Sophie Chevreteau, Gide Loyrette Nouel
1.3 Key Industries 2024 confirmed the trends observed the year before: (i) Artificial Intelligence remains a major market, and accounted for about 20% of VC investments (including, in particular, Mistral AI and Poolside AI), and (ii) greentech remained attractive, with a significant increase in fundrais - ings (notably Electra and Hysetco).
• a management company authorised in the EU that also complies with the requirements of the AIFM Directive. These management com - panies can be full-scope alternative invest - ment fund managers (AIFM) (as defined by the AIFM Directive) or sub-threshold AIFMs. (In the latter case, most of the regulatory requirements of the AIFM Directive still apply by virtue of French local regulatory rules.) Other types of investment vehicles include lim - ited-liability companies used by professional investors and club deals formed by business angels. The corporate documentation generally estab - lished to govern the affairs of the VC Fund com - prises by-laws, prospectuses and subscription agreements and ancillary documents (SFDR appendix and KID PRIIPS, when applicable). As per the contractual documentation, there can also be a shareholders’ agreement and side let - ters. The governing documents of a retail fund (FCPR, FCPI or FIP) must comply with detailed French law requirements for the fund to be approved by the AMF. Therefore, investors in a retail fund generally do not have the flexibility to negotiate the terms or to request protection in addition to that already provided by the by-laws. 2.2 Fund Economics The “Funds Principals” of VC funds mainly par - ticipate in the economics of these funds through carried interest mechanisms. Carried interest remunerates the performance of the manage - ment team in selecting potentially attractive investment opportunities and aligns the inter - ests of investors when it comes to realising the expected capital gains on the sale of these investments.
2. Venture Capital Funds 2.1 Fund Structure
Venture capital fund (VC Fund) structures differ according to the type of investor involved. For retail investors, the most common structures are: • Venture capital funds ( Fonds Commun de Placement à Risque – FCPR); • Innovation common investment funds ( Fonds Commun de Placement dans l’Innovation – FCPI); and • Regional investment funds ( Fonds d’Investissement de Proximité – FIP). For institutional investors, the most common structures are: • Professional private equity funds ( Fonds Pro- fessionel de Capital Investissement – FPCI); and • French limited partnership ( Société de Libre Partenariat – SLP). It should be noted that funds structured in the form of SLPs are the most commonly used to date. These funds must be managed either by: • a French management company approved by the French Autorité des Marchés Financiers (AMF) and authorised to act as such under Directive 2011/61/EU (AIFM Directive); or
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