(Startups’ financial imbalances and their effects on venture capital funds and managers: preliminary remarks)

(Startups’ financial imbalances and their effects on venture capital funds and managers: preliminary remarks)

Abstract:

The article offers practical reflections on the legal effects of losses, net equity imbalances, and undercapitalisation in startups backed by venture capital entities and closedended collective investment undertakings.

In particular, it analyses the relevance of these situations as prerequisites or grounds for company dissolution, distinguishing between the manifest impossibility of achieving the corporate purpose and net equity imbalances caused by losses.

The article highlights startups’ particular exposure to these risks due to their prolonged investment phases and corresponding losses, as well as the limited scope of Law 28/2022. Finally, it examines the range of effects for investing entities and their management companies, which have obligations both toward the entities themselves
and toward the portfolio companies when they act as directors.

In this context, the entity may lose its investment, and the management company may incur joint and several liability for the debts of the portfolio company.

Keywords: Dissolution, members’ voluntary liquidation, net equity imbalances, undercapitalization, venture capital.