China Private Equity Fund Legal And Regulatory Research

Different from mutual funds, a private placement fund is a funded reserve drawing capitals from limited certain qualified institutions and wealthy individuals in an unopened way. Since Chinese Economic Reform, private placement funds, as kind of newly emerging financial products, have thrived in Chinese capital market and played an irreplaceable active role in the rise of Chinese economy nowadays. Recently, China is experiencing a period of rapid economic development and the world is changing in a fast way as well, private placement fund have been a good choice motivating the fast and sound economic growth in China.As private placement funds grow fast in recent China, related regulations are urgently needed to ensure a stable capital market. China has entered WTO for years, the integration with the international finance and economy has been an inexorable trend. As a rising country, China is speeding itself to be a economical giant in the world, moreover, the important status of private placement funds in the international economical environment and capital market has been gradually cognized, private equities will occupy a noticeable place in Chinese capital market. In this very moment, it is not enough in supervising Chinese private equities by simply referring and employing the Trust Law, Securities Acts, Company Law, Partnership Acts, Operational Guide to the Investment Securities and Trust Business of Trust Companies and other related laws and regulations. The author believes it is the time we stimulate the legalization process of Chinese private placement funds in a pragmatic attitude, using laws and regulations to define and classify such funds, clarify their features, and thus to make effective administrative measures and to reinforce the administration to thriving private equity investment fund. The author also gives suggestions to the administration of private equities, which has already played an important part in private placement funds, in hope that Chinese capital market is to be legalized and prosperous development of Chinese economy is to be ensured.This essay, through the analysis of the definition, classification, characteristics, importance, status quo, and problem and through the comparison of our status quo with the advanced experiences of western countries, discusses and concludes a suggestion that meets the needs of the legal and administration to Chinese private placement funds.According to the systematic and comprehensive study, the author, in allusion to establish and improve the legal and administration of private placement funds, constructively brings forward several legal principles that shall be defined in the process of such administration. These include: the principle that a unique and sophisticated administrative system shall be established; that legal supervision dominates while industry's self-restriction also plays a role in the administration; that we shall learn from others'experience and practice pragmatically; that we shall insist the capital independency of private equities; and that the behaviors of private placement funds shall be rational and effective. After specifying such principles, the author consulted with related theories in the science of economy and law, learned from the advanced experience in other countries and regions, raised series of examples and finally reached a comprehensive and scientific suggestion on the establishment of the administration to Chinese private placement funds. Specifically, the author believes that the subject of each party in a private placement funds and its duty shall be defined, that clear criteria to qualify the investors in a private equities shall be set, that the rights and responsibility of the initiators, administrators, and trustees of a private placement funds shall be clarified, and the administrative organizations and their duties shall be defined. As far as the information disclosure regulation is concerned, a relatively strict control shall be employed. And, in the respect of taxing, double taxation shall be avoided by using legislating and administrative methods. Since there are loads of private placement funds in China, it is better to practice classified administration.