On The Protection Of Limited Partners Of Limited Partnership Private Equity Funds

With the rapid development of our country’s economy, financing needs of various enterprises continuously stimulate the prosperity of the private equity fund. As the private equity fund in foreign countries has a long history and has been quite mature in terms of legislation and practice, which has a profound impact on the development of private equity fund in China. In terms of the legal organizational form of private equity fund, limited partnership private equity fund has become the mainstream in foreign countries because of its unique advantages, so China’s revised "Partnership Enterprise Law" in2006introduced the system of limited partnership, which provides the legal basis of the limited partnership private equity fund in China. For the purpose of the limited partnership, the protection of limited partners’ rights and interests is particularly important for its development, and safe harbor rules are important ways of such protection.Firstly, this article gives a brief introduction to the theoretical basis and the development of safe harbor rules to show the legitimacy and rationality of the design of safe harbor rules. Secondly, the situation of the legislation and practice of protecting limited partners’rights and interests, the composition and characteristics of the member of the limited partnership and the range of safe harbor rules between China and the United States are summarized. Moreover, the differences between the legislation and practice of safe harbor rules are also well analyzed. And then the article reviews the problems faced by the protection of limited partners’ rights and interests, namely the principal-agent between general partners and limited partners, adverse selection of limited partners, moral hazard of general partners resulted from the asymmetric information and the conflict of interest problems. In the end, the approaches of protecting limited partners’ rights and interests and the importance of solving the foresaid problems and the existing problems of safe harbor rules are put forward.