Venture capital firms and their partners have unique exposures. HDFC ERGO’s
Venture Capital Asset Protection (VCAP) policy safeguards their reputations and
investment returns by mitigating potential losses.
The policy is a comdined product offering management Liability, management indemnification,
outside Directorship and professional services Liability insurance in one policy
- helping eliminate gaps in your insurance programme.
- The following are some of the exposure that venture capital firms
face as investors and developers of emerging companies:
- Positions on Portfolio Company boards:
- Active participation in managing your portfolio companies is a hallmark of your
firm, but there are risks to be considered.
- To what extent does the indemnification power of a portfolio company protect a venture
capitalist serving as an outside director, in particular, on the board of a portfolio
company in the SEED or early stage of development.
- Down Round Financing:
- The perception created by down rounds may be that the best interests of other parties
are intentionally not being considered.
- Conflicts of Interest:
- Divergent interests may create scenarios in which not all interested parties feel
they have benefited to the fullest extent possible.
- Some situations create the perception that a venture capital firm is acting unfairly
and in its own best interest while breaching its fiduciary duty to a particular
portfolio company, its management and its investors.
- In-kind distributions:
- An in-kind distribution is a highly anticipated event. What happens if it doesn’t
go exactly as expected.
- Declaring bankruptcy is a reality for some emerging companies, but that reality
can carry significant liabilities for the company’s Board of Directors and
- confidential information:
- How secure is confidential information when it is being communicated via e-mail,
fax or letter or while it sits on a partner’s desk or in a filing cabinet?
- Employment Practices:
- In certain cases, new management is hired to take a portfolio company to the next
level. How does old management feel about this?
- Intellectual Property:
- With thousands of new companies being started the world over every year it is becoming
increasingly difficult to be certain that proprietary intellectual property has
not already been ‘claimed’ by another.
- Initial Public Offering:
- Initial Public offerings invite added scrutiny by unaffiliated third-party investors
of past and present financial information, management decisions, the offering itself,
etc, potentially resulting in costly and distracting litigation.
- Any loss of or damage to property belonging to the Insured or held in trust or on
commission for which he is responsible or any part thereof whilst contained in the
premises described in the Schedule hereto due to burglary or house-dreaking (theft
following upon an actual forcible and violent entry of and/or exit from the premises)
- damage caused to the premises resulting from burglary and/or housedreak ing or any
attempt thereat, any time during the period of insurance upto 5% of the Sum Insured
for all contents.