Study On The Legal System Of Exit Mechanism Of Venture Capital In China

The venture capital (hereafter "VC") industry, which started from the 1920s and 1930s, is different from the traditional debt and equity financing. In its history of almost a century development, VC has promoted development of the global high-tech industry dramatically, and has created a large number of world-class science and technology enterprises.It has played a tremendous role in promoting national economic growth, economic restructuring and technological advances.As a kind of equity capital, the primary aim of venture capital is to gain maximum profit, rather than control or own the enterprises. When the venture-backed enterprises develop into maturity, venture capitalists will consider to exit the venture-backed enterprises and gain return so as to carry on a new round of investment. Therefore venture capital exit is a prerequisite to the existence and development of venture capital. Smooth exit channel ensures that high return will be attained and determines whether venture capital will succeed or not. To establish an efficient VC system, the exit mechanism of venture capital is an indispensable and important segment of venture capital activities. It also has a far-reaching realistic significance to the development of venture capital industry and present economic construction of China.Therefore, from the point of legal system, the article attempts to analyze venture capital exit mechanism. The first chapter introduces the basic principles of investment and the importance of venture capital exit mechanism, as well as compares and evaluates the major exit channels such as IPO, merger and acquisition, stock buy-back and bankruptcy liquidation. At last it concludes that based on its own characteristics high-tech SMEs enterprises should choose appropriate way to withdraw venture capital. The second chapter analyzes the status quo, problems and shortage of venture capital exit system in China. The third chapter, using the reference of exit mechanism of venture capital in America, propose to establish and consummate the exit mechanism of venture capital in China, such as establishing the second security market in China to serve venture enterprises, developing merger & acquisition market, consummating stock buy-back and bankruptcy system.