Work

The Allocation of Control Rights in Financing Private Companies: Views of Estonian Private Equity and Venture Capitalists

Year: 2007

Type: article

Abstract: This paper analyzes the allocation of control rights in financing private companies by private equity and venture capitalists in Estonia.Structured interviews with main providers of venture capital and private equity were conducted to collect the information about the current practice in Estonia and to highlight topical problems in this field.Due to the legal restrictions imposed on the preferred shares and convertible debt, most Estonian venture capitalists use common shares in financing high-growth firms and take similar risk position as entrepreneurs.Although, by using common shares, venture capitalists obtain voting rights, the minority ownership by itself does not provide sufficient protection of their interests.Venture capitalists increase their influence over the company through the active involvement in supervisory and management boards and detailed termsheets which include different vetoes and additional clauses.

Source: Trames Journal of the Humanities and Social Sciences

DOI: 10.3176/tr.2007.2.07

Authors: Priit Sander, Margus Kõomägi

Institution: University of Tartu

Language: English

Topic: Private Equity and Venture Capital

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: hybrid

Estimated APC paid: $269