If the project selected by the private equity investment fund is focused on the core technology of the target company, it should pay attention to whether the intellectual property rights of the core technology exist. Legal Risks. Legal risks related to intellectual property rights may exist in the following aspects:
1. All trademarks, service marks, trade names, copyrights, patents and other intellectual property rights owned or used by the target company and its affiliates;
2. A list of authors, providers, independent contractors, and employees involved in the development of special technologies and relevant employment development agreement documents;
3. Not applying for a patent in order to ensure proprietary confidentiality non-patent protected proprietary products;
4. Registration certification documents for the company’s intellectual property, including domestic registration certificate, provincial registration certificate and foreign registration certificate of intellectual property;
5. Documents of trademarks, service marks, copyrights, and patents that are being applied for registration with the relevant intellectual property registration authority;
6. Documents of intellectual property rights that are in the process of objection or revocation by the intellectual property registration authority;
7. Documents for extension of intellectual property rights that need to be applied to the intellectual property registration authority;
8. Application for cancellation, objection, or re-examination of registered trademarks, service marks, copyrights, Documents of intellectual property rights such as patents;
9. Claims on trademarks and service marks that are refused registration at home or abroad, including legal proceedings;
10. Other matters that affect the target enterprise or its Agreements regarding trademarks, service marks, copyrights, know-how or other intellectual property rights of affiliates; n. All trade secrets, know-how secrets, employment invention assignments or other assignments of the target enterprise and its affiliates as parties to and binding upon it agreements with other parties, as well as agreements related to the intellectual property rights of the target enterprise or its affiliates or third parties. In addition, issues related to the labor relationship between the entrepreneur and the original employer, the confidentiality of the original employer’s proprietary technology and business secrets, and the agreement to comply with the prohibition of horizontal competition may all lead to intellectual property disputes.
(5) Legal risks due to untrue lawyer investigations or mistakes in legal opinions
Once a private equity investment fund determines a target company, it should hire professionals to conduct legal investigations on the target company. Because both parties are in a position of information asymmetry during the investment process, the role of legal investigation is to enable the investor to learn as much as possible about the true situation of all aspects of the target company before the investment begins, and to discover information about the shares or assets of the target company. All circumstances, confirm whether the important information they already have accurately reflects the assets and liabilities of the target company, so as to avoid damage to the investment. In private equity investment, if the target company is an unlisted company, the level of information disclosure is very low. If investors want to know the detailed information of the target company, they must conduct a legal investigation to balance the inequality in the degree of information control between the two parties and clarify What are the risks and legal issues associated with this merger and acquisition? This way, the parties can negotiate the associated risks and legal issues. The legal risks caused by lawyers' untrue investigations or mistakes in legal opinions during private equity fund investments are legal risks faced by law firms and other institutions acting as intermediaries, investment institutions and start-up enterprises. If due diligence is untrue, intermediaries will bear corresponding legal responsibilities; investment institutions may suffer corresponding losses; and start-up companies may bear corresponding legal responsibilities due to untrue information provided.
(6) Corporate legal risks after private equity investment funds enter the enterprise
1. Risks existing in the daily operation process: contract risks, non-standard operating risks, excessive concentration of claims Come risk.
2. Legal risks caused by management: decision-making risks caused by defects in the governance structure, accidental injury risks to employees, employee moral risks caused by imperfect rules and regulations, and debt risks caused by lax management of company seals.
3. The use of funds causes legal risks: investment cooperation risks, branch risks, lending risks, and guarantee risks.
(7) Legal risks in the exit mechanism
The issuance and listing of target company stocks is usually the highest goal pursued by private equity funds. After the stock is listed, investors as promoters can sell the company stocks they hold after a prohibition period or gradually sell the stocks held in proportion, thereby obtaining huge value-added and achieving a successful exit. There are two main ways to go public: one is direct listing, and the other is shell listing. The standards for direct listing are still relatively high for companies, so Chinese companies are keen on buying shell listings. On the surface, shell listing can achieve the listing goal in a shorter period of time without going through restructuring and listing procedures, and can even avoid financial disclosure and back-payment of tax arrears to a certain extent. However, from the actual situation, at present, my country Most shell resources of listed companies are "dirty", with many debt or guarantee traps and heavy employee placement burdens. If the shell buyer does not fully understand the history of the "shell" company and fails to understand the creditors' request for debt, repayment date and listing, If the company fully investigates some liabilities and other debt issues arising from external guarantees, there will be a risk that creditors will obtain the assets of the listed company through legal means or divide the equity that the shell buyer has acquired, and the company will lose control. The repurchase exit method (mainly refers to the repurchase by the original shareholders and the management repurchase) is actually a special form of equity transfer, that is, the transferee is the original shareholder of the target company. Sometimes it is the company's management that transfers the investor's equity, which is called a "management buyback." Exit in the form of repurchase by original shareholders and management is a kind of investment guarantee for investors, and it also enables venture capital to integrate the characteristics of debt investment with equity investment, that is, the investor enjoys equity in the enterprise after investing. , and at the same time obtain credit protection from the management or original shareholders. The inability to repurchase is also the main legal risk for the exit of private equity investment funds. The performance is as follows: the repurchase clause in the investment agreement when the private equity investment fund enters is illegal or the repurchase operation violates the Company Law and other laws and regulations.
For failed investment projects, liquidation is the only way for private equity investment funds to exit. Early liquidation can help investors recover all or part of their investment principal. However, there are still many legal risks in the bankruptcy liquidation process, including asset declaration, false review, priority, separate rights, joint claims and debts, etc.