Venture capital funding is a complex area of commercial law concerning the sourcing of funding for those businesses which, amongst other things, have a significant potential for growth. Investment into these companies tends to occur at a fairly early stage of their expansion as this is the prime time for them to receive private equity funding in the form of venture capital. Strict attention to regulation and in-depth overseeing of the different elements of this process is a priority for corporate lawyers.
Venture capital funding is available through a variety of means, both public and private. Private investment tends to come from:
- individuals with a high net worth
- insurance or pension funds
- endowments
- crowdfunding
- corporate investors
Public investment can include that from central and local government pension schemes, charities or social investment institutions. The source that is right for your company will depend on its size, nature and future projections.
Corporate lawyers for venture capital funding transactions
Corporate lawyers from Oratto can be on hand for advice and assistance in any area of venture capital funding, whether you are the investor or the company seeking investment funds. Oratto has been developed as an online method of quickly matching highly qualified lawyers with those who need specific legal services. You can choose to connect with any of the selection of corporate solicitors listed on this page, or alternatively, you can send your details to Oratto and we will use our Match facility to identify the right corporate lawyer for your needs.
Corporate lawyers are continually seeing new market trends beginning to emerge in this area. The most recent of these is crowdfunding, which, as a concept, has been around for a long time. However, it's only in recent months that its popularity has increased substantially as confidence in the method and related investment models becomes more secure.
There are a number of issues surrounding fund structuring, including possible concerns over whether the structure of the venture capital fund can affect how investments are made and whether venture capital funding can be invested alongside other funds. Your chosen solicitor will be able to advise on these matters and others such as fund regulation and licensing, investment objectives and the essential legal documentation; which are Articles of association, a subscription and shareholders agreement and service agreements.
Restrictions and regulation in investment funding
In 2013 the Alternative Investment Fund Managers Directive (AIFMD) began to impose new rules on venture capital fund managers who are dealing with funds going into the EEA. But a new approach to passporting has also meant that fund managers do not have to apply for special authorisation in each EEA jurisdiction they are active in. Likewise, the Regulated Activities Order (RAO) has been altered so that it now dovetails neatly with the AIFMD. The activities which are newly regulated are:
- Alternative Investment Fund (AIF) management
- An Undertaking for the Collective Investment in Transferable Securities (UCITS) being managed by an AIF
- Being a depositary for an AIF/UCITS
Tax Incentive Schemes to encourage investment
These schemes encourage investment in venture capital companies. They include:
- the Enterprise Investment Scheme (EIS)
- the Seed Enterprise Investment Scheme (SEIS)
- the Venture Capital Trust (VCT)
Unsuccessful investment
Contingency plans are always required, just in case an investment is made in an unsuccessful company. A comprehensive exit strategy will be needed, and this is something that your Oratto member lawyer can help you plan. The options are usually solvent or insolvent liquidation, or selling to a specialist investor or acquirer. In addition, ideally this exit strategy can be built into the actual investment agreement and ways of doing this include sale/liquidation preferences, placing restrictions on share transfers, imposing drag-along rights or leaver provisions.
Contact Oratto for venture capital funding legal advice from specialist solicitors
Whatever your position, Oratto member corporate lawyers will be able to advise and assist you on a plan of action. Contact Oratto today for in-depth legal advice on venture capital funding.