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On The Construction Of The Legal System Governing Foreign-Funded Venture Capital

Posted on:2005-05-08Degree:DoctorType:Dissertation
Country:ChinaCandidate:Y G ZhaoFull Text:PDF
GTID:1116360122985013Subject:International Law
Abstract/Summary:PDF Full Text Request
Originated from the United States of America, venture capital has now become a fashionable form of investment and drawn worldwide attention, due to its unique effect on fostering and developing start-ups. Operations of venture capital can be divided into three parts, namely: Funding of the venture capital investing institution, making investments into the portfolio company, and exiting of the investment. The principal parties involved are the investors, the venture capital investing institution, and the portfolio company. The very special features of venture capital, which include complexity, volatility and high risk, determine that venture capital be best operated by individuals. Experiences of venture capital operations throughout the world ordain that, for the venture capital to succeed, a complete set of laws, rules and regulations that guarantee an amicable operational environment be indispensable. Venture capital development in China is encountered by various issues such as insufficiency of capital input, shortage of venture capital talents, dysfunction of exit mechanisms, et cetera, which might be adequately solved by introducing foreign venture capital into China. But, unfortunately, the inadequate development of China's legal system on venture capital greatly hinders the inflow and the subsequent domestic operations of the foreign venture capital. Therefore, to establish a comprehensive legal system governing the foreign venture capital is of immeasurable value to the full utilization and healthy development of China's foreign venture capital. Consisting of the introduction, the six chapters as the main body and the conclusion, this article aims to tackle with this issue.The introduction part briefly explains the purpose of the research, the motivation of the author, the structure and the principal points of the dissertation, and the academic significance of doing this research.Chapter One "Venture Capital and the Legal System" begins with studies on the source of the term "venture capital", the meaning, the characteristics and the importance of venture capital, followed by description of the whole cycle of the venture capital operations with highlights on the cyclical nature and the influence of the unique nature upon the governance structure of venture capital. Chapter One ends with the outlining of the legal framework on foreign venture capital.Chapter Two "A Comparative Study on Laws Governing Venture Capital" selects and compares the legal systems on venture capital of multiple countries while focusing on those of the U.S. and Japan. This part reveals that the venture capital success requires a comprehensive legal system and explores the institutional elements for achieving the success, which mainly include the legal systems for venture capital raising, capital flow, agency problems, and the operator's risk-bearing capabilities.Chapter Three "Laws on Foreign-Funded Venture Capital Firms" juxtaposes the commonly seen organizational forms of venture capital firms to find that the limited partnership is the optimal form and viable for venture capital, because such a form offers obvious advantages in tax, power distribution, incentive mechanism, durationof business, and operational cost. This chapter also singles out the contents frequently seen in the venture capital agreements, surveys and appraises China's foreign venture capital firms and the status quo of the governing laws. Then the author puts forth the applicable forms that China's foreign venture capital firms can adopt and points out the demerits inherent in China's existing legal system.Chapter Four "Laws on Foreign Venture-Backed Enterprises" analyzes the legal relationship between the foreign venture capital firms and the foreign venture-backed enterprises, and finds the instruments that govern the said relationship are nothing but the venture capital agreement between them and the unique governance structure of the portfolio company. To follow up, the dissertation probes into the legal documents for financing in the form of ven...
Keywords/Search Tags:Venture Financing Agreement, Governance Structure, Limited Partnership, Template of the System
PDF Full Text Request
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