Corporate Governance, Stock Market and VC-法搜-中国法律信息搜索网

　　
　　4. Buybacks
　　In a buyback exit, the VC will sell its shares to the entrepreneur and/or the company. The entrepreneur is the new owner of the VC抯 shares. Buybacks are an inferior form of exit reserved for cases in which the investment is a 搇iving dead?or 搇ifestyle?company that satisfies the entrepreneur抯 desire for profit but has virtually no home run potential.
　　5. Write-offs
　　An investment will be fully written off when the VC determines that there is little or no prospect of ever recovering its initial investment.
　　IV.Corporate Governance of Investee Company and the Contract between VC　and Entrepreneur
　　1. Features of corporate governance and the VC contract
　　Unlike the situation of a developed company, VC funds have much stronger say in the corporate governance of investee companies that is disproportional to their investments. Venture capitalists are often active investors, monitoring the progress of firms, sitting on boards of directors, and meting out financing based on the attainment of milestones. Venture capitalists often retain important control rights that allow them to intervene in the company''s operations, even replace the entrepreneur as CEO when necessary. In addition, venture capitalist provide entrepreneurs with access to consultants, investment bankers, and lawyers.
　　Just as Steven N. Kaplan and Per Str鰉berg observed, the contract between VC funds and entrepreneurs often contain the following content: cash flow rights, voting rights, control rights, and future financings are frequently contingent on observable measures of financial and non-financial performance. If the company performs poorly, the VCs obtain full control. As company performance improves, the entrepreneur retains / obtains more control rights. If the company performs very well, the VCs retain their cash flow rights, but relinquish most of their control and liquidation rights. The entrepreneur抯 cash flow rights also increase with firm performance. It is common for VCs to include non-compete and vesting provisions aimed at mitigating the potential hold-up problem between the entrepreneur and the investor.