Venture Capital Legal System

After the World War Two, the venture capital industry came into its modern form as the result of the formation of American Research & Development (ARD) founded in 1946.Then, especially in the 1980s and 1990s, venture capital industry made a big success in America, and was introduced by Britain, Japan and the other countries. Now, China has absorbed it and promotes its development zealously. Law has played an important role in promoting venture capital industry. Analyzing the legal relationship of the participants in venture capital industry and discussing how to rule venture capital industry by law is the main topic of this dissertation.Besides an introduction and conclusion, the main body of this dissertation falls into eight chapters. Chapter one sums up the history and producing reasons of venture capital, and analyzes the concept and characters of venture capital and its important roles. Chapter two expatiates on the theories of venture capital legal system. The first two chapters lay a foundation for the following analysis.Chapter three analyzes three participants of venture capital, i.e., investors, the venture梑acked firm and the venture capital organization (or venture capitalist). Venture capital organization is the most important participant in all of the three, because venture capital organization is the intermediary between investors and venture-backed firm. Venture capital firm consists of three organizational makeup's, that is, corporate venture capital firm, business angel and venture capital limited partnership. Venture capital limited partnership is the typical organizational makeup of venture capital firm. Chapter four focuses on the analysis on venture capital limited partnership. It discusses the reasons of the emerging of venture capital limited partnership and the contract of venture capital limited partnership. It proposes that China should introduce venture capital limited partnership to promote the development of venture capital industry.Chapter five takes insight into contractual relationship between venture capitalistand venture-backed firm, including business plan, term sheet, investment agreement and employment agreement. Chapter six analyzes legal institution of venture capital exit, including initial public offering (IPO), the sale of the whole venture-backed firm or part shares of the venture-backed firm, shares buy-back and liquidation.The last two chapters analyze the two actions of government in venture capital industry, and the role of government includes supporting and supervising. Chapter seven draws an inference that the government should take part in venture capital industry at the beginning stage actively in China, then gives place to the market as the venture capital industry have reached full growth or development gradually. Chapter eight discusses the necessities of the government supervision in the development of venture capital industry, and indicates the principles, the system and the measures of the supervision. And it emphasizes the choice of the model of supervision system in China.The dissertation's principal contributions include three aspects. At first, it systematically analyzes the legal system of the venture capital industry from the perceptive of the economic law, civil law and economics. Secondly, it proposes that limited partnership is the best organization of venture capital industry on the basis of analysis of different organization forms. And it maintains that China should introduce venture capital limited partnership. Thirdly, it discusses China government support model in venture capital industry and building the venture capital supervision system of prior self-discipline and government supervision supplement.