A growing number of investors and asset managers are considering setting up their own venture capital fund manager in Hungary – whether to invest in start-ups or in SMEs within an institutional framework. The good news: Hungarian regulation offers a significantly simplified route for so-called “below-threshold” venture capital fund managers compared with full, EU-level fund manager authorisation.
What is a “below-threshold” fund manager?
Under the law, a venture capital fund manager is below-threshold if the combined assets of the funds it manages do not exceed EUR 100 million (including leverage) or, under certain conditions, EUR 500 million. The vast majority of venture capital fund managers operating on the Hungarian market fall into this category.
What team is needed?
In this case the law does not require the usual management of at least two full-time executives – a single chief executive officer is sufficient. In addition, a supervisory board of at least three members is needed, as well as someone to perform the compliance function – which may be the chief executive officer. In practice, most such fund managers also appoint an auditor, although the law does not expressly require this.
How much capital is required?
A below-threshold fund manager does not have to meet the standard euro-denominated capital requirement – the general minimum for the chosen company form is sufficient: for a privately held company limited by shares, just HUF 5,000,000 of subscribed capital.
What infrastructure is needed?
A real, actually used office, basic communication tools (telephone, internet, e-mail), and administrative and IT security procedures proportionate to the size of the business – a large-company-grade dedicated IT system is not required.
How does the authorisation process work?
The process consists of roughly half a dozen steps: incorporating the company, preparing the supervisory documentation (rules of operation, personal documents), paying the procedural fee, submitting the application electronically through the ERA system of the Hungarian National Bank (MNB), the MNB’s decision, and finally registration with the court of registration.
What does it cost?
The one-off start-up cost typically consists of the subscribed capital (HUF 5,000,000) and the MNB administrative service fee (HUF 2,700,000) – about HUF 7,700,000 in total, excluding ongoing running costs (office, salaries, accounting).
Why work with a specialist?
Although the process looks straightforward from the above, the details – preparing the right documentation, applying the statutory exemptions correctly, liaising with the MNB – require considerable professional experience. The lawyers of PV Partners regularly assist clients in establishing and licensing fund managers, from initial planning to the start of operations.
If you would like to assess what you need to launch your own venture capital fund manager, please get in touch.