The number of venture capital companies (SCR) has experienced exponential growth in recent years to the point that they are already about to surpass that of the SICAVs. The change in regulations a few years ago for the latter so that they could maintain this consideration and benefit from the taxation enjoyed by collective investment funds, caused a flurry of closures of SICAVs, especially those of family origin and that had the which was called mariachis to complete the minimum of one hundred required shareholders who contributed the minimum capital to the company.
Many family groups then took the opportunity to transform them into venture capital companies, which led to an increase in their registration, with double-digit annual growth in the last five years. According to the latest data from the regulator, their number now stands at 494 companies, on the verge of the 495 in which the number of SICAVs has been reduced from the more than 3,000 that there were, according to data from Inverco.
Guillermo Santos, partner of the independent advisory firm iCapital, comments that, despite maintaining tax advantages, the SCR impose conditions regarding the investment, since “there is no room for financial assets since they would be taxed at the normal Corporate Tax. The increase in volume of the venture capital industry in Spain is due to this phenomenon“he emphasizes.
This trend towards launching family SCRs is taking place at a time when Alternative management has gained weight in investors’ portfolios as a way to de-correlate traditional assets, under the promise of obtaining greater profitability in exchange for the illiquidity that this type of vehicles requires and the assumption of more risk as well. The cost of this type of company, and of alternative funds in general, encourages firms to promote their incorporation, despite the fact that high-net-worth clients behind SCRs normally focus, above all, on the advantage fiscal.
Santos adds that in recent years many family groups have invested or are considering investing in this type of entities, with the taxation associated with these investments being an aspect to consider. “In particular, Of particular interest is the possibility of applying the benefits of the family business regime due to the indirect ownership of these investments.. But the SCR should not be considered a heritage entity because in that case it will not have tax benefits,” he points out.
Tax advantages
Cristina Mayo Rodríguez, partner in Financial Taxation at finReg360, explains that the doctrine of the General Directorate of Taxes recognizes that SCRs are investment companies suitable for applying the incentives of family businesseswhich means that they are assets that could benefit from the family business exemption provided for in the Wealth Tax and the Temporary Solidarity Tax on Large Fortunes, as well as a 95% reduction in the Inheritance and Donation Tax, on the part of the portfolio it affects, provided that a series of conditions are met.
Specifically, over 60% of the assets, what is technically called, the mandatory investment coefficient. “These benefits would be directly applied and, for the remaining 40%, the rule requires that the SCR take positions of at least 5% of the voting rights and that material and human means be available to direct and manage participation,” explains the expert, who recalls that “there are certain controversial aspects in relation to the application of family business incentives for SCRs, such as who is responsible for the actual management of the company, whether it is necessary to comply with the additional requirements for 40 % of the asset, if all the investments are invested in accordance with the rules of the investment coefficient or what happens during the first years, where the regulations allow you a period of time to build the investment portfolio and comply with the rules of the aforementioned coefficient.
That is to say, many questions that have led some firms such as Creand WM to warn about the need to receive specialized advice before launching into the constitution of a venture capital company, since any aspect that may be considered by the regulator as technically questionable could result in you not being able to benefit from tax advantages in a possible review by the regulator.
Hence Jorge Ferrer, co-founder and partner of finReg360, points out that SCRs must be professionally managed by management companies authorized by the CNMV or be established as self-managed companieswhich “must meet requirements similar to managers in terms of human and technical resources for investment management,” he explains.
“What is critical when channeling the investments of a family group through an SCR is to guarantee compliance with these principles, ensuring active and professional management of the portfolio and not distorting this figure,” concludes Ferrer.
Santander, leader in SICAVs
Despite the reduction in the number of SICAVs in recent years to less than 500 companies, from the more than 3,000 there were, there are still entities that maintain a significant share in the management of variable capital investment companies.
It is the case of Santander, which remains the leader of management firms, with 120 companies of this type under its charge (with 3,657 million euros of total asset volume). It is followed by Bankinter, with 90 SICAVs (1,951 million) and Andbank, with 61 SICAVs (842 million).
LinkedinBeloud
#number #venture #capital #companies #close #SICAVs
