Venture capital companies are to be distinguished from private investors (natural persons) such as business angels, or venture capital funds, which are not legal entities but are managed by professionals. The funds are often in partnership with public entities as well as banks (or companies) and thus allow individuals to invest in small companies or start-ups with an innovative character.Top of Form
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The qualification of a venture capital company corresponds to a very precise definition, with several characteristics.
The Venture Capital Corporation (SCR)
Its activity consists in entering into the capital of unlisted companies. Thus, a company is classified as an SCR if its assets are at least 50% owned by shares or shares in unlisted companies with their registered office in the European Union (or in Iceland or Norway). The management of its portfolio of securities must be its sole activity, even if it is accepted that it delivers external services if the turnover that it derives from it is limited. Investments in the SCR must be minority interests.
The SCR is exempt from corporation tax (on income and financial income withdrawn from investments). The shareholders of the SCR benefit from an income tax exemption (if the securities of the SCR are kept for at least five years and other conditions) – but no social charges.
A particular type of venture capital company: the SUIR
There are also SUIRs (Individual Investment Companies with Risk): their corporate purpose must be very specific, they are SASUs that allow individual investors to invest.
Some SUIRs are specialized in a certain type of projects, in a certain sector for example.
The SUIRs have (and must have as their object of business) subscriptions (in cash) to the capital of companies in the process of creation or growth, which fulfill several conditions (less than five years old, IS, majority owned by natural persons, limited to 30% stake in these companies).
As pointed out, the SUIRs are SASUs. And they benefit from certain tax advantages (to encourage these individual investors to invest). Thus the dividends of the sole shareholder are exempt from income tax.