Belgian Private Equity Funds: Understanding the 'Private Privak' Vehicle

First created in 2003, the Private Privak, an investment vehicle primarily intended for private equity investments, had limited success. This changed when, in the Act of 26 March 2018, both the corporate and tax treatment of the private privak were changed in order to make it more attractive and flexible for investment in private equity and growth companies.

What’s changed?

The most important changes identified are the reduced investment threshold, the abolishment of the restriction on acquiring a controlling stake in the portfolio companies. The maximum term of existence for the Private Privak also became more flexible and there have also been some favourable tax related changes.

The aim of these changes was to grant a similar status as those for foreign investment funds and create a financial centre in Belgium for private equity funds looking at the European market.

On 26 April 2019, the Belgian Parliament adopted a law which contained various financial provisions, some of which impacted provisions of the AIFM Law applicable for the Private Privak.

The main aspects we take away from this reform are that the sole minimum capital requirements should be those pursuant to the Belgian Company Code, although if the vehicle is compartmentalised each compartment will need to meet these requirements separately. The law also provides a broader definition of non-listed companies in which the Private Privak can invest, now including companies established outside of the European Economic Area.

Furthermore the law has clarified the supervision powers of the SPF Finance who will monitor the compliance of the Private Privaks with the AIFM Law and the Royal Decree. As part of their compliance control the law has granted SPF Finance several tools.

Increased popularity

One year after the changes in the framework it is clear that the measures have increased the popularity of the investment vehicle. Today Belgium counted 78 Private Privaks, with more in the pipeline, compared to 50 this time last year.