| "Corporate Fund"in this essay, refers to an open-end securities investment fund established in the form of corporation. As the most widely used pattern in the US, it has in recent years developed rapidly in the UK and Japan as well. China has not yet introduced this system and all the domestic securities investment funds are structured as contract funds. Considering the advantages in the respect of fund governance mechanism of Corporate Fund, introduction of this system turns out to be an inevitable trend. In fact, Corporate Fund has currently drawn great attention of the theorists and regulatory authorities. In this essay, I try my efforts, with the expectation of building of this system in China, to explore some legal issues relevant to Corporate Fund with the comprehensive research methods of law and economics. The full text is divided into seven parts as follows.The part of introduction interprets briefly the background with this topic, the situation of study over it, literature review, research method and framework, breakthrough and insufficiencies additionally in my essay. I pick this topic on the occasion of amendment of the Law on Securities Investment Fund, which has received various proposals presented by a great number of scholars led by Wu Xiaoling. It was an honor for me to participate in the research and writing work of the Shanghai project team, and in the process I realized the special value of this system and finally with the encouragement of my tutor I decided my doctoral thesis on it. Due to lack of legislation and practice of Corporate Fund in our country, the theoretical study of this system is limited on a superficial level and extremely speaking, close to a blank. This thesis is conducted by the research method of combining law and economics science, binding comparative and historical analysis, and integrating theory and practice. What is new in this essay: 1. Corporate Fund is a business chain linked by fund investors, fund corporations, fund managers and fund trustees. The legal relationship in Corporate Fund system does not simply refer to the interrelationship in the corporation, but the one among corporation, managers and trustees; 2. With the same essence as contract fund, the Corporate Fund is built on trust relationship; 3. By the way of dialectical analysis, we will find that independent director system is the key to the Corporate Fund system, the one which is totally different from the contract fund in our country; 4. The analysis on the necessity of development of Corporate Fund in China and its systemic value; 5.My proposal to the design of our country's own Corporate Fund system.The first chapter will outline the Corporate Fund, with separate descriptions of investment funds, Corporate Fund and the necessity of our introduction of this system. Section one of this part will give an account of some foundational issues such as the classification, characteristics, status of its legal subject of fund and investment fund, and will focus on the existing problems in our working pattern of investment fund. Section two of this part will first dissert the definition, characteristic and classification of Corporate Fund, and then stress some misinterpretations about it, and then, the distinctions between Corporate Fund and contract fund: (1) the focus of these two patterns is distinguished; the core of Corporate Fund, the fund corporation, is an independent legal entity, which shares the right of entering into a contract and proceeding a lawsuit. (2) the discretionary power of these two patterns is different; the Board of Directors in the Corporate Fund system is awarded a comparatively great power of commercial discretion. With no clearly defined decision-making rules, the Board of Directors could determine discretionarily whether or not the contracts signed by managers or distributors will be approved. (3) By comparison with contract fund, the fund holders in Corporate Fund share more voting rights. Section three of this part will conduct a thorough analysis on the necessity of introducing Corporate Fund. By comparison we will reach the conclusion that public offering investment funds foresee a favorable development prospect in China, but the contract fund in China embodies a few congenital deficiencies in its system design: First, the General Assembly of fund holders is only an empty title; Second, the supervision of trustees over managers could not be implemented; Third, opportunistic behaviors of managers cannot be effectively restricted in this pattern; Fourth, the independent director mechanism performs practically no function at all. Corporate Fund has an obvious systemic edge over contract fund, which is characterized in two aspects: First, the use of modern corporate system as its organizational form separates the ownership, management rights and supervisory rights, in which the system of property rights is more efficiently arranged. Second, due to the establishment of an efficient mechanism of internal constraints in its governance structure, the General Assembly and the Board of Directors could operate as effectively as its supervision over managers and trustees. The second chapter will narrate the development of Corporate Fund in different nations and tell what we should learn from them through historical research. Historical development of Corporate Fund in some main nations, the reason why it is supported by government in these nations and the enlightenment of their experiences to our country will be presented in this part. Section one of this chapter selects six representative nations worldwide, the US, Britain, Japan, France, Germany, Luxembourg, and introduce separately their development courses of Corporate Fund. Section two makes a comparative analysis of the reasons why the US, Britain and Japan introduce and develop the Corporate Fund from the perspective of history. Section three dissects the law under the development of foreign Corporate Fund and its significance to China. With the combination of the summed up common reason of foreign countries'Corporate Fund development and China's actual national situation today, the main legal obstacles China is facing will be put forward. Based on the comparison of legislative modes of different nations, this thesis will further raise the institutional design of China's own Corporate Fund system. Chapter three will study the legal relationship of Corporate Fund. By analyzing its process of practice through the social relationship Corporate Fund regulates, the subjects of this relationship and the mutual relations among them will be defined clearly. To specify the legal relationships among the subjects of Corporate Fund, this essay will take the US as an example to give an overview of its operation based on the inspection of US Corporate Fund. Based on the research above, this thesis makes the point that the Corporate Fund system contains not only the internal legal relationships in the corporation, but also the relations between fund holders and fund corporations, fund corporations and fund managers, and fund trustees in between. Further study of the legal relationships in Corporate Fund makes it in a broad sense a kind of business trust.Chapter four will make a deep analysis of the governance mechanism of the Corporate Fund, with the independent director system as its core. This part will illustrate separately the Board of Directors (independent directors as its core), the function of independent directors, the origin of independent director mechanism and its legislative process, and then, raise question of its practice. Section one will give a brief account of the critical design of fund corporation, the Board of Directors. With the conclusion that the General Assembly and the voting right of shareholders is just a nominal existence, this essay will focus on the special design of its Board of Directors. Section 2 will explain the functions of independent directors. Through the speculation of the conflict of interest inside and outside the fund corporation, the function of independent directors will be highlighted. And then this thesis will analyze its function of supervision and other specific functions and powers. Section three gives a review of the origin and legislative process of independent directors. Then I will explain from a historical perspective the four factors in the appearance of independent directors and its following legislative process in the US. Section four will discuss independent directors from the standpoint of practice. Theory and practice integrated into considering, this sector will put emphasis on the statutory definition of independency of independent directors and my question on its actual function. Chapter five is focused on the study of trustee of Corporate Fund, which covers three sections as below: brief introduction to trustee in the contract fund, brief introduction to trustee in Corporate Fund and the comparison between these two patterns of fund. Section 1, the brief introduction to trustee in the contract fund defines the central legal status of trustee in the fund, and analyzes respectively separation theory and unified theory in the mode of trustee, and further, describes China's particular co-trustee mode. Section two, the brief introduction to the trustee in Corporate Fund, centralizes on the trust obligation of its trustees and the range of this kind of trustees. At last section three makes a comparison between these two patterns of trustee and find they differ in the aspects listed below: (1) the function of trustees is different (2) that the power of trustees in the Corporate Fund could change if needed make the relations of principals and trustees more balanced. (3) the range of trustees is distinguished.In the last chapter of this essay, I would like to offer my proposal on how to construct our country's Corporate Fund system, in which the legislative model of Corporate Fund and the design of its governance mechanism would be my two focal points. The first section in this chapter concludes that there stand two models to construct our Corporate Fund system, considering the present legal basis we have, and besides, raises the idea that we could try it first as a kind of financial innovation. The second section elaborates on my design of the governance mechanism of Corporate Fund. Six specific aspects as follows paint my blueprint of it: (1) Mode of the Board of Directors. (2) Function of fund trustee. (3) A positive mechanism of the General Assembly. (4) Principles of independent directors system. (5) Mechanism of shareholders action in litigation. (6) Mechanism of reputation establishment.
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