Summary and conclusions
By offering high growth companies the access to financing means necessary to their development, efficient risk capital markets can have a significant impact on growth and employment creation. Acknowledging that, the European Commission launched in 1998 a wide-ranging initiative to promote the development of a substantial pan-European risk capital market.
In April 1998, it published a communication "Risk capital: a key to job creation in the European Union". This communication identifies six types of barriers: (i) market fragmentation, (ii) institutional and regulatory barriers, (iii) taxation, (iv) paucity of high-tech SMEs in the EU, (v) human resources, (vi) cultural barriers. Along with an Action Plan, it was approved by the June 1998 European Council. In the six areas identified in the communication as the main barriers to the development of risk capital markets in Europe, the Action Plan proposes initiatives to be taken at Community or at Member States level.
On 24 November 1998, the Commission organised a round table on the situation of the European risk capital market, with the major actors in the field : representatives of the main high growth stock markets, venture capital funds, institutional investors, companies listed on these markets and regulatory bodies. The conference was opened by Jacques Santer, President of the European Commission, the keynote address was given by Mr Peter Sutherland, Chairman of BP and Commissioner Mario Monti chaired the third panel and drew the conclusions. The aim of the conference was to compare the situation of stock markets dedicated to innovative high-growth companies in Europe to the situation in the USA and to draw some lessons on what should be done to create an appropriate framework for the development of a true European market.
The main suggestions put forward by the participants were the need to:
(i) ensure fiscal transparency for venture capital funds; (ii) lighten taxation on stock options; (iii) modify bankruptcy rules to give a second chance to entrepreneurs; (iv) give fiscal incentives to investment in equities.