Costa Rica’s National Council of Financial System Supervision approved the regulations covering the operation of the long-awaited Venture Capital Funds.
These instruments are an alternative for financing projects or companies, especially those which by their nature have limited access to traditional funding mechanisms.
These funds are designed to be invested in private companies in Costa Rica that have not participated in the stock market and meet certain requirements, among which are the existence of business plans, feasibility studies, corporate governance and reporting and transparency of information.
The fund may invest directly in the company or in debt securities issued by it. Additionally, the company board administrator must report each investment or withdrawal of investment.
The regulation allows the existence of diversified and undiversified venture capital funds. The first must meet certain criteria of diversification, among which is the fact that it should not invest more than 20% of its total assets in the same company or invest more than 40% in companies in the same economic group.
The minimum investment to be made as a shareholder of the fund is $50,000, and the fund must have a minimum of $1,000,000 in net assets.
Source: National Council of Supervision of the Financial System (Costa Rica)
More on this topic
November 2011
The regulations for the investment of venture capital funds, which were recently published by the Superintendency of Securities, have generated positive expectations from market participants.
Although there are differences of opinion, most experts in the field feel the addendum to the regulation of investment funds covers all the minimum elements that must be detailed in an instrument of this nature.
July 2011
The proposal to finance small enterprises using venture capital remains stalled.
Since last year, authorities have been analyzing financial market regulations that support the creation of the framework and its use for small businesses.
The delay, they say, is because they want to analyze every aspect of it, especially with regard to the risks, believing it could its use could become popularised among investors that do not meet the profile.
July 2011
The connection between entrepreneurs with good ideas and sophisticated investment professionals results in venture capital funds.
For years, experts in this type of investment have tried to promote the development of a format that will allow the participation of several sophisticated investors in the financing of enterprises that require resources for their development.
April 2010
Costa Rica approved a system to finance the construction of public works via trusts and securitization.
Approved by supervisor Conassif, the mechanism comprises the creation of “Issuing Trusts”, which will issue securities in the local market. Said securities must be priced $50.000 or more, and may only be bought by sophisticated investors.
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