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Q. What Is the Venture Capital Incentive Program (VCIP)?
Q. What is the role of the VCIP?
Q. What exactly is Venture Capital?
Q. How do investors make money?
Q. How does the Tax Credit Work?
Q. How do I register a Venture Capital Company?
Q. What is a Qualifying Investee Company (QIC)?
Q. How do I qualify as a QIC?
Q. Will the Venture Capital Company control my business?
Q. How long is the investment period?
Q. How is an exit made?
Q. Is debt financing better than equity financing?
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| Q. What Is the Venture Capital Incentive Program (VCIP)? |
| The Venture Capital Incentive Programme is an alternative investment vehicle hat allows investors to make long term equity investments in small and, medium size businesses while receiving the opportunity to enjoy higher than average returns with a very attractive tax credit incentive.
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| Q. What is the role of the VCIP? |
| The VC1P provides investors with a tax credit to invest in venture capital companies who would in turn invest, via venture capital in small and medium sized businesses.
In addition, the VCIP acts as a facilitator - it brings investors and investees together under the program. It is also the regulatory body that ensures administration and compliance with all legislation, policies and procedures under the Venture Capital Act.
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| Q. What exactly is Venture Capital? |
| Venture Capital is a form of long term investment also know a patient or equity capital. That is typically invested in businesses with potential for growth and profitability. In addition to capital, the venture capital investor also brings hands on managerial expertise to the investee companies.
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| Q. How do investors make money? |
| Investors get returns through dividends from the net income of the investee companies, from capital gains through the sale of shares that have appreciated in value and the tax incentive.
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| Q. How does the Tax Credit Work? |
| Investors receive a tax credit certificate immediately upon making an investment in a registered venture capital company, in the amount of 30% of the investment made. This tax credit may be used to offset any of the investors tax liability in the year that the, investment is made. However, if not fully utilized that year it may be carried forward until full utilized.
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| Q. How do I register a Venture Capital Company? |
| To register a Venture Capital Company, it must first be a newly formed Company created specifically for making investments under the Act. It must have an initial paid up share capital of at least $50,000. After one year the paid up share capital must be increased to $500,000. The company must abide by all regulations stipulated in the Venture Capital Act.
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| Q. What is a Qualifying Investee Company (QIC)? |
| A QIC is a company that is eligible to receive venture capital investments under the VCIP. It could be a new startup or an already existing company.
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| Q. How do I qualify as a QIC? |
| The company must be a limited liability company authorised to issue equity shares to investors. It should have paid up capital base of $5 million or less and employ no more than seventy five employees. This company should no be operating in any of the following categories:
Financial Services
Non-value added retail services
Property management
Customs Brokerage
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| Q. Will the Venture Capital Company control my business? |
| No. The venture Capital Act strictly prohibits control by me venture capital companies who can only own up to 50% of the QICs voting shares.
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| Q. How long is the investment period? |
| The venture capital company must invest in the QIC for at least five (5) years but must make an exit before ten years.
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| Q. How is an exit made? |
| The venture capital company could make an exit via a number of ways including
Sale of shares back to the business owner
Sale to third parties (investors, other companies)
Sale on .public stock exchange (taking the company public)
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| Q. Is debt financing better than equity financing? |
| Debt and equity are not necessarily substitutable. Instead, they should be seen as options to be considered towards achieving the optimal cost of capital given a businesses stage of development.
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