Study On Legal System Of Venture Capital Withdrawal

The modern-sense venture capital industry,which started from the 1930s and 1940s,has nurtured a large number of today's IT giants such as IBM, Apple, HP, ect. Venture capital refers to a unique capital management mode which offers financing in the form of convertible securities to startup firms and small businesses with perceived long-term growth potential. The venture capital fund may participate in a startup firm's management and operation, but normally a venture capital fund doesn't have the intention of owning the startup firm in long term. Instead, when the venture-backed startup firm develops into maturity, venture capital will exit the startup firm and achieve a high return. So the withdrawal mechanism is a key link of the venture capital investment which sustains great responsibility of realizing the capital investment and gain investment income.This paper summarizes and analyzes the obstructions and factors that restrict the exit of venture capital. After that, combining the situation in China, this paper puts forward several suggestions to better the withdrawal mechanism of venture capital basing on the experiences of the United States. The first chapter introduces the concept of venture capital and its withdrawal mechanism, as well as demonstrates the importance of the withdrawal mechanism of venture capital. The second chapter introduces four common withdrawal mechanisms including IPO, mergers and acquisitions(M&A), stock buy-back, and bankruptcy liquidation. After that, it analyzes the advantages and disadvantages of these four common withdrawal mechanism. The third chapter centers the actuality of our venture capital withdrawal mechanism, and points out the problems IPO and M&A in present China. The Fourth chapter, using the reference of withdrawal mechanism of venture capital in the United States, proposed relevant suggestions concerning this issue.