NETHERLANDS Law and Practice Contributed by: Marc Habermehl, Jeroen Smits, David de Groot and Max de Heer, Stibbe
2.3 Fund Regulation Regulatory Aspects of VC Funds
ried interest refers to a share of profits that the fund manager receives as a performance fee, cal - culated as a percentage – typically around 20% – of the fund’s profits after returning the inves - tors’ capital, increased with “hurdle amount” . This serves as an incentive for fund managers to generate positive returns for their investors. The hurdle amount is a minimum return that investors must receive, and is calculated as a percent - age of the capital that investors have invested in the fund (eg, 6% to 8%). For a discussion of the Dutch tax regime applicable to carried inter - est (the so-called lucrative interest regime) and certain developments relating thereto, see 5.3 Taxation of Instruments . General Partner Commitment To ensure that the fund managers also have “skin in the game” , and to create stronger alignment of interests between the fund managers and the investors, the fund managers are generally required to invest in the fund themselves on the same terms as the other investors (eg, 1% to 3% of the total committed capital). Claw-Back Provisions in Fund Agreements The final amounts to which the fund managers and the other investors are entitled can only be established after the fund has been dissolved and all investments have been disposed of. However, since proceeds will be distributed dur - ing the term of the fund, fund agreements will provide for so-called claw-back arrangements, which require the fund manager and each inves - tor to restore funds to the fund, if and to the extent that it has received distributions in excess of the amounts it would have received if no dis - tributions had been made until the dissolution of the fund.
A VC fund will, for regulatory purposes, typi - cally qualify as an “alternative investment fund” ( alternatieve beleggingsinstelling ). This definition stems from the EU’s Alternative Investment Fund Managers Directive (AIFMD) as implemented in the Netherlands by the Financial Supervision Act ( Wet op het financieel toezicht , or Wft). Managers of alternative investment funds (AIFMs) are regulated by the Netherlands Author - ity for the Financial Markets (AFM). If an investment vehicle qualifies as an alterna - tive investment fund, it falls within the scope of the AIFMD. Under the AIFMD, a licence require - ment applies to an AIFM, but small AIFMs only require a registration in accordance with the de minimis exemption in the AIFMD (often referred to as the “AIFMD-light regime” ). There are two categories within the AIFMD-light regime. In each case, a registration with the AFM is required. Please note that, unlike for a fully fledged AIFM licence, the registration cannot be passported to other EU member states. Offering exclusively to professional investors If an AIFM offers units or shares in an alternative investment fund to professional investors, and manages (one or more) alternative investment funds whose total assets under management are less than or equal to EUR100 million or are less than or equal to EUR500 million (in the case of an AIFM managing alternative investment funds that do not use leverage and that are closed- ended for the first five years), the AIFM is exempt from the licensing regime but is required to reg - ister under the registration regime.
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