When scientific and technological personnel come out to start a business, they should first pay attention to the labor relationship with their original units. Usually, the scientific and technological personnel who are brave in starting a business are the technical backbone of the original unit, and their departure may bring great losses to the original unit, so the scientific and technological entrepreneurs must properly handle the labor relations with the original unit. For the unexpired labor contract, it is necessary to actively negotiate and deal with it, which does not constitute a breach of contract. At the same time, in the process of the establishment and development of a startup enterprise, the proprietary technology and business secrets of the original unit shall not be infringed, otherwise disputes may arise. This will not only contain the energy and time of entrepreneurs, but also be detrimental to the introduction of venture capital.
In addition, there is the problem of infringement of intellectual property rights. According to Article 6 of China's Patent Law, the right to apply for a patent belongs to the unit, not to the material conditions for scientific and technical personnel to perform their tasks or use their units. Scientific and technical personnel who use patented technology to start a business and reach an agreement with the original unit constitute patent infringement on the original unit. The defects of the ownership of the core technology of venture enterprises will obviously affect the entry of venture capital, because to a great extent, venture capital may value this technology.
⑵ The initial shareholding structure and technical shareholding of venture enterprises.
Under the current "Company Law" system in China, start-ups usually take the form of limited liability companies when they are founded, so the nature of equity is single, that is, they are all common shares of limited liability companies. This is very different from some western countries, but this single ownership structure is more conducive to the entry of venture capital. Judging from the requirements of the number of shareholders, according to the provisions of Article 20 of the Company Law, the number of shareholders of a limited liability company should be more than two and less than fifty, except that the state-authorized investment institution or state-authorized department can independently invest in the establishment of a wholly state-owned limited liability company. In practice, if there are only two shareholders, some industrial and commercial administrations will require that the contribution of any shareholder should not exceed 80% of the registered capital.
Technology shareholding is also one of the core issues concerned by the founders of venture enterprises. Article 24 of the Company Law stipulates that the amount of capital contribution with industrial property rights and non-patented technology at a fixed price shall not exceed 20% of the registered capital of a limited liability company, unless the state has special provisions on the adoption of high and new technologies. 1997 In July, the State Administration for Industry and Commerce and the former State Science and Technology Commission jointly issued the Provisions on Several Issues Concerning Sharing Shares with High-tech Achievements, and in May, 1998 issued the corresponding implementation measures. According to this regulation, the total amount of shares contributed by high-tech achievements can exceed 20% of the company's registered capital, but not more than 35%.
At the same time, certain conditions and procedures must be met, such as: the technology of shareholding must meet the standards of high and new technology, belong to the high and new technology range listed by the former State Science and Technology Commission, and should be the core technology of the enterprise; Investors have the legal right to dispose of the technology by way of capital contribution; The technology of shareholding must be evaluated. If the price exceeds 20% of the registered capital, the evaluation results should also be reported to the provincial science and technology management department for confirmation. Article 229 of the Company Law stipulates that if the company is a high-tech joint-stock company, the proportion of technology shares shall be stipulated separately by the State Council. However, this provision has not been formally promulgated.
(3) the corporate governance structure of venture enterprises
When establishing a venture enterprise, a complete corporate governance structure should be established according to the Company Law. According to the Company Law, as a limited liability company, a startup enterprise shall set up a board of directors with three to thirteen members. A board of supervisors shall also be established, with no less than three members. At the same time, the company law also stipulates that a limited liability company with a small number of shareholders and a small scale may have only one executive director and one or two supervisors instead of a board of directors and a board of supervisors. Sometimes, flexible measures can be taken to set up only the executive director and one or two supervisors, and the board of directors and the board of supervisors are not set up for the time being. This simple governance structure is suitable for small scale, few shareholders, and other shareholders have no substantial impact on the company's development. For example, in a venture enterprise composed of two shareholders, one shareholder is a technology entrepreneur and enjoys the controlling stake in the company, while the other shareholder does not know technology, does not participate in the operation, only provides office space and holds 20% of the shares. Such enterprises can only have executive directors and one or two supervisors at the initial stage of their business. Adopting a flexible governance structure at the beginning of the establishment of venture enterprises is conducive to the rapid decision-making of venture enterprises and timely solving the problems encountered in the process of starting businesses. With the development of venture enterprises, especially after the introduction of venture capital for the first time, venture enterprises should gradually establish a complete board of directors and board of supervisors to facilitate scientific decision-making and management of enterprises.
(4) production and operation plan
Business plan is a financing plan for venture enterprises to introduce venture capital. The business plan should introduce products or services, technical advantages, management team, capital use plan, profit expectation, etc. Introduce venture enterprises to venture capitalists in detail. Although these contents seem to be purely commercial, lawyers still have a lot of work to do in the process of making business plans for venture enterprises. When assisting in the preparation of a business plan, it is especially necessary to review and ensure the legality and feasibility of the financing itself and the use of funds, and put the whole financing process under the legal framework. Careful and rigorous business plan, full of legal awareness and risk control awareness, will attract investors more. (1) Preparation of negotiation outline. The negotiation outline here refers to the outline prepared by venture entrepreneurs for financing negotiations with venture capitalists. A well-prepared negotiation outline is conducive to improving the efficiency of financing negotiations. Once venture entrepreneurs come into contact with venture capitalists, they can express their views and business plans as fully as possible according to the negotiation outline. At the same time, it is also conducive to deepening the good impression of venture capitalists on the management quality and efficiency of venture enterprise management team. The contents of the negotiation outline usually include: the introduction of enterprise products or services and technology, the introduction of management team, the amount of funds needed, the time and progress of investment, the arrangement of equity ratio, the establishment of the board of directors, the exit mode of venture capital, etc.
(2) Investment in venture capital Due to the high threshold for the establishment of joint stock limited companies and the characteristics of venture enterprises, under the current company law system in China, most enterprises that absorb venture capital are limited liability companies. Therefore, venture capital is usually converted into common stock of a single limited liability company, unlike the options such as common stock, convertible preferred stock and convertible bonds in the United States. Under the current legal framework, the main way of venture capital is to increase capital and share, that is, to increase venture capitalists as shareholders of venture enterprises. After the venture capital is injected, it will be added as the registered capital of venture enterprises, rather than paid to the original shareholders. In a few cases, when venture capital is invested, it may be accompanied by the arrangement of equity transfer while increasing capital and shares. For example, the original shareholders of start-up enterprises want to partially cash out, or due to policy restrictions or the need for future stock issuance and listing, the ownership structure must be adjusted. The completion of the investment procedure of venture capital in the form of limited liability company should be marked by the completion of industrial and commercial change registration. After the signing of the venture capital agreement and other documents, the venture enterprise shall go through the formalities for industrial and commercial registration of equity change and capital increase at the original industrial and commercial registration authority of the venture enterprise with the venture capital agreement (capital increase and share expansion agreement), the revised articles of association of the venture enterprise, the resolution of the shareholders' meeting of the venture enterprise on agreeing to absorb venture capital, and the resolution of the shareholders' meeting or the board of directors of the venture investor on deciding investment.
(3) due diligence. Due diligence is an important legal work in venture capital projects. The main purpose is to ensure the legality of investment, and to prevent and avoid venture enterprises from making major mistakes or misleading statements to venture capitalists in all financing documents and agreements. On the one hand, it is conducive to the smooth progress of venture capital procedures, on the other hand, it is conducive to avoiding the original shareholders of venture enterprises from bearing civil liability to venture capitalists because of misstatement in the future. The main contents of due diligence work generally include: lawyers of start-up enterprises and lawyers of venture capitalists should independently review the articles of association, company law and all other relevant laws and regulations of start-up enterprises to ensure that investment projects do not violate laws or articles of association. At the same time, it is necessary to carefully review all major contracts signed by venture enterprises, so as to avoid foreign default of venture enterprises due to investment projects. Attention should be paid to the authenticity and completeness of all statements made by venture enterprises in financing documents and related agreements. For some important situations, it is necessary to carefully check the relevant government approval documents, resolutions of the company's shareholders' meeting, resolutions of the board of directors, etc. If necessary, it shall also investigate the relevant issues to the directors or senior managers of the venture enterprise and make investigation records.
(4) Legal opinions. In large-scale venture capital projects, venture enterprises and venture capitalists will require their lawyers to issue legal opinions as the basic documents on which investment projects are based. The contents of legal opinions usually include: the legal establishment and effective existence of a startup enterprise, the legality of business operation, the legality of introducing venture capital and equity structure arrangement, the effective signing of financing documents and agreements, the approval of relevant government departments that have been obtained or should be obtained, the effectiveness and enforceability of investment agreements, existing or possible litigation or arbitration cases of startup enterprises, and the contradiction between investment agreements and original external agreements of startup enterprises. If intellectual property rights such as patents or copyrights are involved, we should also express our opinions on the legality and integrity of these rights, and even ask intellectual property lawyers to express professional opinions.
5] Venture capital agreement. In American venture capital practice, venture capital agreement is usually called stock purchase agreement, which is the core document of venture capital projects. Although this kind of agreement is usually drafted by investors' lawyers, it is obvious that venture enterprises must be familiar with the terms and contents of the agreement in order to fully protect the legitimate rights and interests of venture enterprises in the process of introducing venture capital and successfully complete the investment process.
In the current practice of venture capital in China, venture capital agreement has not been paid attention to by venture capitalists and venture enterprises. Many venture capital projects only use the general shareholders' contribution transfer agreement (equity transfer agreement) without venture capital agreement. It should be pointed out that the venture capital agreement cannot be replaced by the shareholder contribution transfer agreement. Venture capital pursues successful exit and high return, so venture capital is different from general equity investment. The venture capital agreement must stipulate the conditions of venture capital and the rights and obligations of both parties, which is not only the premise of venture capital, but also the legal guarantee for the successful withdrawal of venture capital.
The main contents of the venture capital agreement usually include: a. the expression of investment transactions. Including the names of the parties to the transaction, the amount of investment, the investment time, the proportion of shares, the direction of the use of funds and the registration procedures for industrial and commercial changes;
B. statements and guarantees of the start-up enterprise and its original shareholders. This clause mainly guarantees the legal and effective existence of venture enterprises and the legal and effective investment transaction itself, which is the premise for venture capitalists to invest. Such clauses mainly include: legal establishment, effective continuation, business legitimacy, organization, financial status, litigation and arbitration, major foreign-related contracts, patents and other intellectual property rights, tax incentives, and the legality of introducing venture capital;
C. prerequisites for venture capitalists to fulfill their investment obligations. Usually, venture capitalists will also put forward some special requirements for venture enterprises and their original shareholders. Only when these requirements are met can venture capital be invested. It can be seen that the main function of such clauses is to let venture capitalists analyze, clarify and grasp their own investment risks, including the provision of legal opinions, audit reports, the signing of employment contracts for core technicians, commitments on refinancing, operational risk control and asset disposal.
D. risk enterprise management. Such clauses mainly include the composition of the board of directors and the board of supervisors, the convening of the shareholders' meeting, the appointment and removal of directors and supervisors, the preparation of financial statements and their regular submission to shareholders for review. It is worth mentioning that after the venture capital investment reaches a certain proportion, venture capitalists will send directors to the board of directors of venture enterprises, which is not only their right as shareholders, but also conducive to venture enterprises to use venture capitalists' talents and capital market resources to improve their management level and capital operation ability. It is the last link of venture capital project. For successful investment, exit is the investment income that finally realizes its capital appreciation; For the failed investment, withdrawal can recover part of the investment principal and reduce losses. There are four basic ways to withdraw from venture capital: initial public offering, equity transfer, repurchase by original shareholders or management liquidation. The withdrawal of venture capital in any way will have a far-reaching impact on venture enterprises.
① Initial public offering. After the stock is listed, venture capitalists, as promoters, can sell their shares in venture enterprises or gradually sell them in proportion after a lock-up period, so as to gain great value-added and realize successful exit. The listing of Kingdee Software invested by overseas venture capital on Hong Kong Growth Enterprise Market is the latest model of this model. In addition to overseas securities markets such as Nasdaq and Hong Kong Growth Enterprise Market, China's soon-to-be-opened Growth Enterprise Market will also be the first choice for venture enterprises to go public. Of course, some large enterprises can also choose to enter the main board of China.
(2) Equity transfer. Equity transfer is another important way to successfully withdraw from venture capital. Under China's current company law system, the equity transfer of a limited liability company is also called the shareholder contribution transfer, and the equity transfer of a joint stock limited company is also called the share transfer. If the transferee obtains the control right of the venture enterprise after obtaining the equity, this equity transfer will also form a company acquisition. The basic procedures for equity transfer of limited liability companies and unlisted joint stock limited companies include: the shareholders' meeting or shareholders' meeting of the enterprise adopts a resolution to agree to the transfer; Integrate and package enterprises with the assistance of financial consultants or brokers, lawyers and accountants; Authorization or consent of the general meeting of shareholders or the board of directors of the transferor and transferee; Negotiation and consultation; Make and sign the equity transfer agreement and other documents; Go through the formalities of industrial and commercial registration or share transfer for changing shareholders. Some projects need to be approved by the competent government departments before they can go through the formalities of equity change. For example, the equity transfer of foreign-invested enterprises needs to be approved by the original foreign examination and approval authority; For the transfer of state-owned shares, the evaluation items and results need to be approved and confirmed by the state-owned assets management department; The transfer of shares by promoters of unlisted joint stock limited companies must be approved by the original examination and approval authority of the joint stock company.
(3) Repurchase by the original shareholders or management. In fact, it is a special form of equity transfer for the original shareholders of venture enterprises to buy back the equity of venture capitalists, that is, the transferee is the original shareholders of venture enterprises. Sometimes it is the management of the venture enterprise that gets the equity of the venture capitalist. At this time, it is called venture entrepreneur repurchase or management repurchase. Withdrawing through the buyback of the original shareholders or management is a kind of investment guarantee for venture capitalists, and it also makes venture capitalists integrate the characteristics of debt investment with equity investment, that is, venture capitalists enjoy the equity of venture enterprises after investment, and at the same time obtain the guarantee of realizing the creditor's rights in the original shareholders or management of enterprises. The operation procedure of repurchase by original shareholders is basically the same as that of equity transfer, but this repurchase usually depends on the repurchase clause in the investment agreement signed when venture capital is invested.
It is worth mentioning that the original shareholder or management buyback is usually wrongly expressed as "corporate buyback". Strictly speaking, the original shareholder or management repurchase and enterprise repurchase are two completely different transactions. The buyback of the original shareholders or management only means that the venture capitalist transfers its shares to the venture shareholders or management of the enterprise, while the enterprise buyback means that the venture enterprise is required to recover the shares held by the venture capitalist and return its investment, and the registered capital of the enterprise will be reduced accordingly. Judging from China's current company law, there are obstacles to enterprise repurchase. Based on the principle of capital preservation in the Company Law, Article 34 of the Company Law of China stipulates that shareholders of a limited liability company shall not withdraw their capital contribution after registration; 149 also stipulates that a joint stock limited company shall not, in principle, acquire shares of the company. Therefore, in China's venture capital practice, the buyback exit mode mainly refers to the original shareholder buyback or management buyback.
(4) liquidation. For failed venture capital projects, liquidation is the only way for venture capital to quit. Throughout the development history of American venture capital industry, due to the high risk of venture capital, a large number of investment projects are going to liquidation. For unsuccessful investment projects, early liquidation will help venture capitalists recover all or part of their investment principal. According to the Company Law, liquidation includes non-bankruptcy liquidation and bankruptcy liquidation. Non-bankruptcy liquidation refers to the liquidation when an enterprise is ordered to close or dissolve due to the expiration of its operating period, resolution of the shareholders' meeting or violation of the law; Bankruptcy liquidation refers to the liquidation after an enterprise is declared bankrupt according to law because it is insolvent and unable to pay off its due debts. In bankruptcy liquidation, because the enterprise is insolvent, the venture capital invested by venture capitalists as shareholders will be wiped out.
There are great differences between the two kinds of liquidation in specific operations, but there are also similarities in basic procedures. These similarities include: setting up a liquidation team; Notify creditors and announce creditor's rights; Registration and confirmation of creditor's rights; The liquidation group shall clean up the company's assets and prepare a balance sheet and a list of assets; The liquidation group formulates the liquidation plan; Pay off the debts of the enterprise, and if there is any surplus property, the shareholders will distribute it according to the shareholding ratio; The liquidation group shall make a liquidation report; Apply to the Administration for Industry and Commerce for cancellation of company registration.