7.8 This is the issuing and/or selling of shares in order to raise funds. These shares can be of many classes (different types with different rights), and can include voting and non-voting shares (see Chapter 8). The principal sources of equity funds are:
● founding participants;
● venture capitalists/private equity funds, including through trade sales; and
● the capital markets through flotation and a public listing.
7.9 The use of an LLP or LP structure allows for capital investment by founding participants on the formation of the JV and also provides a vehicle in which venture capitalist/private equity investors would be prepared to invest. However, because an LLP is not able to issue equity securities generally to the public, it would not normally be suitable for a flotation or listing on capital markets and, in that regard, offers less flexibility than a traditional company limited by shares or guarantee.
7.10 It is common for initial equity funding to be provided by the participants. For many JVs, the private sector participant may be expected to fund initial equity (with the public sector body participant providing other assets). For 'route to market' JVs, typically, equity funding will be provided by the founding participants in the early stages of the JV's existence (such as the initial funding round), however later the involvement of venture capitalists or private equity funds may be required.
7.11 When additional shares are issued, it is important to consider the implications, particularly with respect to dilution of the public sector interest (see example 8 below).