Compliance Of The Private Equity Fund Development And Operation Mode

Private fund is a collective investment that its capital is raised from particular investors in the community. When compared to public funds, the private fund is not opened to the public. The private fund is not an illegal underground funds and it is under regulated. Private fund is a product of China's continuous development and expansion, and its existence is in a growing trend. As the legal status of private funds have not yet been fully established in PRC, internal issues are inevitable. There are also challenges from foreign private equity fund.Therefore, legislation for private equity fund is predestined. Legalization of the private market can enrich the variety of investment vehicles, change the existing market competition situation, impact on the traditional concept of fund operations, reduce transaction costs, and prevent financial risks. Moreover, it can motivate China's securities market and the national economy.It is necessary for China to learn from overseas' experiences in legislation for private fund, especially in United States, whose is more mature in the management, organization and fundraising of the private equity fund than other countries.In building of the legal scheme in private equity fund, attentions are paid to the following issues: the prerequisites for entry of funds in the market; organizational structuring and capital raising; risk management including monitory bodies supervising the sources of fund, disclosure of information, and to strengthen the supervision of bank credit, setting up of rules in distribution of benefits of shares and liability, etc.This paper is divided into five parts. The first part introduces the basic theories, types and concept of private equity funds. The second part includes the introduction, present situation and existing problems in private equity funds, explaining the necessity of legislation. The third part comprises overseas' legislative experience. The fourth part is the focus which provides recommendations on legislative policies of private equity fund in aspects of legislative principles, entry requirements, organizational structures and risk management. The fifth part consists of the analysis of operations of the current private equity funds.