This thesis is research devoted to the study of civil law regulation for venture capital investments of innovation activities in Ukraine. It explores the effectiveness of potential improvements to the current legislation in the context of the European integration processes of Ukraine. It offers recommendations for changes to existing legislation implementing effective legal mechanisms to support alignment with international practice of venture capital investments in innovative activity in Ukraine.
This novel research analyses the international practice of structuring venture capital deals and the legal doctrine determining the legal status of the entities involved in venture capital investments in the aspect of civil law and the possibility of its application, following adjustment, to the legal reality of Ukraine. The author identifies the idiosyncrasies of the entity's legal status, organizational structure, and incorporation, in the context of the legal framework that underpins the objective of venture capital investment in innovative activities in Ukraine as well as the legal regime of the objects of venture capital investment of innovation. It also investigates and clarifies the forms and methods that can be used to effectively protect the rights of the parties of venture capital investments.
Based on the results of this research, the author makes a number of theoretical propositions and conclusions. In particular, it demonstrates that venture capital investment in innovation in Ukraine is a type of activity undertaken by venture capital investors to acquire equity shares of recipient companies engaged in innovation at an early stage of bringing their innovative product to the market and/or scaling it up, aimed at making a profit from the subsequent sale of these shares, and is characterized by high risks and long-term returns on investment.
This research thesis aims to identify legal obstacles within civil law regulations influencing the success of VC Investments in Ukraine. It reveals the essence of venture capital investment through the idiosyncrasies of the entities of VC deals; a special object (share (s) in the portfolio company); and the existence of an increased risk of negative results or failure to obtain the desired result from the innovative activity of the company.
The author formulates the concept of the entities of venture capital investment in innovation activity and the idiosyncrasies of their legal status in the context of Ukrainian Civil law regulation. Due to the unique structure and special role occupied by venture investment in innovative activity the key questions are specified separately for institutional investors (VC Funds), individual venture capital investors, and start-ups, shares in the equity capital of which are the object of venture capital investment.
Based on the study, it is proved that a startup as a recipient of venture capital investment is a subject of investment activity, owner or holder of a venture capital investment object which, in exchange for shares in equity capital, received property, property rights and other assets from an investor for ownership or use and uses them in its business activities or in joint business activities with an investor. The features of a startup that characterize it as a party of venture capital investment in innovation activities are: 1) a newly created company; 2) innovative orientation of its activities; 3) significant market potential; 4) high risk of activities in the field of innovation.
The author elucidates the theoretical understanding of crowdfunding technology as obtaining money to finance the production of new products (services) from a large number of people using social networks or special online platforms. It demonstrates that crowdfunding technology should not be attributed to angel investment since crowdfunding is a method of distance trading, although it performs the function of raising funds for innovative projects.
The author concludes that in international practice, a venture fund is not considered as a legal entity, and it should be understood as a type of activity which can be carried out in a fairly wide range of organizational and legal forms – limited partnership, limited liability company, and limited liability partnership.
The author further develops the provisions of the importance of a systematic approach to issues of addressing civil law mechanisms, namely, consolidation of the specifics of the corporate forms and legal status of venture capital investment entities, the legal frameworks of objects; issues of amending the content of contractual regulation; forms and methods of protection of the rights of venture capital investment entities in innovation.
