| Private Equity Funds is a financial innovation of the capital markets. Through Non-Public Offering to institutional investors or individuals, it raises funds for the rights of non-listed investment companies. Investors share in accordance with its share of investment income and bear the investment risk. Through the control or management of professional fund managers so that the value of the investment companies obtain value-added, and withdraw through the exchanging on stock market, mergers and acquisitions or management buy-back to profit shares.The Private Equity Funds in China began in the 20th century, the 80's, after more than two decades of developing, it became one of the important financing ways to enterprise and enhanced the economic. In fact, a number of legal vacuum was emerged in Private Equity Funds for the lack of relevant laws or imperfect regulations. To a large extend, they have impeded the development of the whole market. The establishment and improvement of China's private equity fund regulatory mechanism through learning the experiences of foreign country has essential theoretical and practical significance.In order to better regulate the operation of private equity funds, we need to be constructed the legal system with China's national conditions for accelerating the evolution of Private Equity Funds. The essay hopefully could generate some benefits for domestic private equity markets.There are seven chapters in this paper:Chapter 1 through pulling into a case on the Lenovo derived M & A funds from three private equity companies to leads to the purpose of the study and writing of this essay.Chapter 2 brings some general information about the private equity from a different perspective on the essence of private and other relevant comparison, including its concept, specialties, market structures and functions.Chapter3 talks about general theory about regulation of private equity. Through revealing the risk of private equity funds and analyzing the Principle of economics, it proposed the urgency of stepping up the Regulation of the private equity funds and the special demand in China.Chapter 4 compares the different monitoring system of private equity funds in other countries or areas. Makes some researches on how western countries carry out the private equity market from the aspects of financing, market access system, regulating measures, as well as exiting. It emphasizes on how to strengthen the supervision of the market subject and behavior.Chapter 5 analyzes the present situation of private equity in China and illustrates the problems and potential risks that private equity may bring. It mainly discusses the reasons from a non-healthy investment system, hard to exit from the market and lack of monitoring by governments and other agents. In condition, through pointing out the promoting and hindering factors of China's private equity funds, the article urgency emphasize on improving the legal system laws.Chapter 6 proposes the he legal framework of the regulation about private equity funds .It includes two aspects. One is regulatory principles and institutional choice, the other is construction regulatory measures. Under the guidance of the principle of supervision, contrary to the character of private equity in China capital market, the author makes specific legal advice to regulate private equity market referring to foreign experience and our local legislation. Under the financial crisis environment, it main includes the regulatory regime; market access; taxations; and the main market behavior, such as perfecting information disclosure, escaping policies and so on.Chapter7 summarizes the full text and looks ahead the future of private equity market under the regular legislations. Meanwhile the writer raises nurturing multi—level capital markets to prosper market—centered economy in China.
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