The new Act on Venture Capital Investments, Venture Capital Companies and Risk Investment Funds will come into force on June 16 1998.
Risk investments (the acquisition of an interest in a limited liability company or a joint stock corporation) can be made through venture capital companies or risk investment funds. The establishment of these funds and the activities of venture capital companies and fund management companies require the permission of the State Money and Capital Market Supervisory Authority, which continues to subject them to strict supervision in their future business behaviour.
Funds are established and managed by fund management companies which issue the fund shares either in printed or in dematerialized form. Physical (printed) securities can be transferred by endorsement.
Both fund management companies and venture capital companies must be established in the form of a joint stock corporation, whose shares are registered shares. Venture capital companies may also be set up as a branch of a foreign company.
The subscribed capital of a venture capital company or fund must be at least Ft500 million (US$2.4 million) and may consist only of cash contributions.
The law contains certain investment restrictions. For example, venture capital companies and funds may not acquire interests in certain types of companies (eg financial institutions, insurance companies, investment companies and clearing houses). With only a few exceptions, funds may not acquire real estate, and venture capital companies have only a limited right to do so. The acquisition of stock exchange-listed securities is ruled out.
Venture capital companies may be established either for an indefinite period of time or for a minimum period of six years, and funds may be established only for a definite period of time, with a minimum of six years.
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