How, When and Why to Use the Corporate Venture Capital (CVC) Model

July 17, 2024 | BY

Susan Mok

Geoffrey Chan and Angela Liu of Skadden, Arps, Slate, Meagher & Flom in Hong Kong examine key structuring considerations for international companies planning to establish a corporate venture capital arm in China or elsewhere in Asia

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Summary

  • The first question for a company to ask is whether and how it should establish or use a CVC model for its strategic initiatives in Asia
  • Commercial considerations include the nature of the investment team; alignment of compensation and incentives; autonomy and control; and tax, accounting and regulatory issues
  • There are many other factors to take into account including the structure's complexity, maintenance costs, ease of deal execution governance process and control rights over investee companies
  • The various potential legal forms of the CVC each have their own merits and drawbacks