Favorable conditions for venture capital financing

Signing of the Law “On Amendments and Additions introduction to Some Legislation Acts of the Republic of Kazakhstan on the Issues of Venture Capital Financing” by the Head of State has become the most important event of this week. The purpose of the document is to improve the financing vehicles of new technologies market. The developers of the law are the subsidiaries of “Baiterek” Holding – “National Agency for Technological Development” JSC and the Ministry of Investment and Development.

Key innovations and expected results of the signed document are as follows:

- the law promotes the growth of innovative enterprises, investment rally of market participants, creation of new jobs and increasing of entrepreneurial activity;

- determines the legal status of venture capital funds;

- enables private investors to invest in risky projects at an early stage of development more confidently;

- allows market participants to join their deposits and execute common activity on venture capital financing without forming a legal entity for profit extraction;

- authorizes institutes in the field of information and communication technologies, for example, “Zerde” national holding to provide venture capital financing;

- innovations in a long term perspective will allow to ensure scientific and technological progress, as well as an increase the number of entrepreneurs in the field of new technologies development;

- the law provides for the introduction of new contractual instruments of corporate law, in particular, elements of English law in the system of venture capital financing;

- provides for the agreement on the rights of the participants of the partnership exercitation to set the agreed “rules of the game” between partners, including the conditions for “entering” and “exiting” from the business, as well as reducing of corporate conflicts risk;

- provides participants with the opportunity to protect their rights as much as possible and settle the aspects not regulated by the charter and the foundation agreement of the partnership.

- introduces the “option agreement” instrument, according to which one of the parties undertakes to fulfill its obligations provided that the other party specifies requirement.

- provides the participants of the venture capital fund with the opportunity, apart from the other property provided for by Kazakhstan legislation, to use the right of claim of the participants to the partnership on financial loans as a contribution to the charter capital of the partnership;

- provides the market participants with the opportunity to include assurances and guarantees regulations in the agreements;

- provides for loss recovery scheme in case of circumstances specified in the agreement.

Please find the language of the law here:

https://www.kazpravda.kz/uploads/redactors/files/5b4437eb2d8881531197419.pdf