Private Equity Fund Internal Governance Structure

Private Offered Fund has operated and developed in international financial market for many years and formulated sets of mature operation mode and internal governance structure. With respect to the development of Private Offered Fund in China, in the legal aspect, people pay more attention to its legal status and external supervision. In fact, the key difference between Private Offered Fund and Public Offered Fund like Securities Investment Fund is the offer target of Private Offered Fund is limited to certain qualified and quantity people that earns more operation room for Private Offered Fund and is put in more loosen supervision condition. As Public Offered Fund, Private Offered Fund is also need to maximize the activity of fund manager and the profit of investors on the basis of protecting and securing the interest of investors. Reasonable internal governance structure of Private Offered Fund enables to stable and balance the relationship of the parties and guarantee the effective operation of Private Offered Fund and the health and stability of the market. However, the internal governance structure of Private Offered Fund in China is disorder, which urgently needs to study the mode and system of internal governance structure of Private Offered Fund. It is hoped some idea can be useful.This thesis is divided into 5 Chapters:Chapter 1 "Preface". Through many times of surge in security market, the Private Offered Fund of China struggled to be. Except for the lawful private offer as trust investment plan, most Private Offered Funds are still lack of their legal status. On the premise of shortage of external instruction and discipline and messy internal governance structure, based on limited study in and out of China, this thesis supposed to compare the internal governance structure in China and abroad in conjunction of the reality of China, analyze the internal governance structure of healthy Private Offered Fund, put forward related suggestion on the existing problems.Chapter 2 "the Overview of Internal Governance Structure of Private Offered Fund" From the regulation of developed country like US, Private Offered Fund is different form general Securities Investment Fund on offering method, object, quality, advertisement and supervising system and so on. It is generally classified into contractual, company and limited partnership organizations. Nevertheless the internal governance of Private Offered Fund is in common with companies'on many aspects, due to the different external law environment and supervision, as well as the serious deputy problem resulting from longer delegation, it requires Private Offered Fund has more perfect internal governance structure. The public offered fund also has some difference from Private Offered Fund on offering object, method, disclosure and outcome of the failure of operation, but they are also in common in lots of aspects, and since in China many rules are on internal governance structure of Public Offered Fund, combined their characteristics, Private Offered Fund could borrow hereof.Chapter 3 "the Status Quo of Private Offered Fund and the Problems in its Internal Governance Structure". The quantity of Private Offered Fund in China is tremendous. Except the lawful private offered as trust investment plan, most Private Offered Fund lack legal status with messy internal governance structure, unsound contract which lead to endanger the interest of investors. Private Offered Fund faced the problems as shortage of laws and regulations for instructing, unlawful investor, manager and trustee, weak risk control ability, and unstable structure and poor protection of investor.Chapter 4 "Comparison and Reference of Internal Governance Structure Mode of Private Offered Fund". Private Offered Fund can draw lessons from internal governance structure of Public Offered Fund combining the characteristic of itself. There are some obvious difference of discipline modes among investor, manager and trustee. According to the relationship among them, contractual fund could be classified to one-contract mode, two-contract mode, co-trust mode and supervision trust mode. Based on two-contract mode, changing the object of the contract, we can design a mode apt to contractual private offered fund in China. As for Private Offered Fund of company organization, it's a better way to fully learn from independent director system of US. Private Offered Fund of limited partnership enjoyed advantages in internal governance, capital operation, financial tax and distribution. But in China, that limitation of partners'number, unreality for person to be general partner, unlawful legal person's status as partner and security account opening may hold back the development of limited partnership.Charpter 5 "Internal governance structure study on Spring Capital Investment Management Co." As the representative of the Private Offered Fund in China, it summaries the defect of the existing internal governance structure of the Private Offered Fund by Spring Capital's failure in 2010, it covers, Defect of the subject-neither the manager of Private Offered Fund nor the fund trustee is the direct beneficiary. There's no relevant motivation and restriction mechanism, moreover, as the beneficiary, the investor can't take part in the capital operation directly; Credibility risk-few legal restrictions to both parties of the contract, it's easy to cause the consignment credibility risk; Double imposed tax-the double imposition prevents the development of the Corporation Systemize Private Offered Fund; Loss of supervision-it's short of outside supervision to the profit share system in the mechanism of Private Offered Fund in China. It will be easy for the illegal to obtain interest by utilizing the leak of the system, which causes negative impacts to the health and stable development of Private Offered Fund.