Hello, here are the answers to your questions. What are the legal risks of equity financing （1） Financing party risk Legal risk In the process of overseas financing and listing, the biggest risk of domestic enterprises is the risk of strict national supervision on mergers and acquisitions and foreign exchange. How to successfully structure and restructure will be the key for Chinese enterprises to go abroad. The risk of control dilution is the biggest risk that enterprises face when they carry out equity financing. The investor's acquisition of some shares of the enterprise will inevitably lead to the dilution of the original shareholders' control right of the enterprise, and even the loss of actual control right. Opportunity risk As enterprises choose equity financing, they may lose the opportunities that other financing methods may bring. The founding shareholders of operational risk have major differences with the investors' shareholders in terms of the company's strategy, operation and management methods, resulting in difficulties in business decision-making. Market risk Due to the lack of understanding of the game rules of overseas capital markets and the operation of international legal rules, domestic entrepreneurs will miss opportunities in many aspects or make improper decisions. （2） Investor risk Legal risks: investment rights and interests cannot be fully guaranteed due to changes in the external legal environment, or the failure of the internal legal subject of the enterprise to effectively exercise its rights and perform its obligations in accordance with legal provisions or contracts, as well as the imperfection of China's legal system. Moral hazard In the process of financing, the behavior of the enterprise management team that is beneficial to the enterprise but not beneficial to the investor may cause the investor to suffer losses. Business risk enterprises fail to establish a perfect corporate governance structure and an efficient management team, which leads to inefficient business management and even chaos, leading to possible losses for investors. Market risk Due to unpredictable factors, the market demand for enterprise products shrinks, and the growth potential drops significantly, leading to the possibility of loss of investors' investment. Financial risk The possibility that the investor's expected investment income will decline due to the unclear financial accounts, unclear structure and weak internal control of the enterprise. Preventive measures (1) During the initial contact, only the summary of the plan is provided; (2) When drawing up a business plan, try not to disclose particularly confidential information and data, as long as the benefits that the products and technologies can bring and the market demand that they can meet are clearly explained; (3) Some key business secrets or know-how should not be told at the last critical moment; (4) Ask other entrepreneurs and intermediaries who have dealt with the investment company; The professional ethics of the employees of the investment company; Know whether they have invested or will invest in your competitors; And other issues that may conflict with the Company; (5) Signing confidentiality agreement: including the scope of confidentiality, the scope of confidentiality obligations, requirements for the information receiver, confidentiality period, liability for breach of contract, etc. (6) When increasing capital and shares or introducing investment, we should reasonably set up the equity structure and the board structure to prevent legal risks as early as possible. When we transfer equity, we must carry out thorough legal planning to prevent corporate control from falling, or even falling into internal friction.
