Exit Mechanism Legal Research Of Private Equity Funds

In recent years, the huge emerging economy of private equity funds in China hasa strong momentum of development. As a new financial investment instruments,private equity funds gradually become an important part of China’s capital market. Atpresent, the private equity funds in China has become an important goal of the worldcapital markets. The prosperity and development of private equity funds not only forthe promotion of great help in the rapid development of national economy andenterprises, but also for the diversification of the mode of operation of capital marketsis of great practical significance. The most benefit from those is the start-up of smalland medium-sized enterprises, such enterprises are mostly belongs to the emerginghigh-tech enterprises, the size of funds and corporate structure is not stable, so theemergence of private equity funds for high-quality small and medium-sizedenterprises provides a platform for industrial structure and the increase of themidwifery.Raising funds, selecting the project and adding value to exit are the three links ofprivate equity funds. Any part of the failure will affect the overall effect of theinvestment projects. The exit of links related to the issue of the final profit, so it is themost critical. The exit of private equity funds is the development of the investedenterprise to further mature, by equity transferring and other methods to obtain areturn on investment mechanism. If there is not reasonable exit channels, the chain ofprivate equity funds will break, resulting that there is no way to achieve capitalappreciation and a virtuous circle. This paper focus on the link of the exit of theprivate equity fund, focused on the rational choice of private equity funds exit path,starting from the exit path in the context of China’s private equity funds, the legalissues involved in a variety of paths to analyze and for the existing issues related tothe perfect proposal.The full text is divided into four parts. First, there is a simple interpretation of the concept of private equity funds, divided into private equity investments, the fundfor the three to define its meaning, with summarized the characteristics of everyaspect; Second, a brief exit mechanism for private equity funds introduction, the mainlisted exit by IPO, exit mergers and acquisitions, share repurchase exit and liquidationexit three paths. There is a briefly bedding for the latter different scenarios of exitingpath; Finally, totally discusses the significance of the exit mechanism of privateequity funds.Explained the system of the private equity funds to exit in American, trying toget and learn from advanced capital markets and legislative experience. The writermainly study from two aspects to the market environment. First, the multi-levelcapital market, the United States is the most successful countries of the modernprivate equity funds, its capital markets known as the "seamless market, the size ofthe different enterprises. The different stages of company development anddevelopment will easily mature capital market to find a suitable location so that theyhave more choice. It has a great driving for the private equity fund. The marketsystem is very representative of the multi-level capital market system, mainly by theMain Board, GEM market, OTC market and regional stock market. Various marketscoordinate others by corresponding to the different development needs of enterprise.The transferring mechanism of USA capital markets system, this system effectivelypromote healthy competition in the capital markets, the survival of the fittest rules ofthe market, and promote the prosperity and development of the entire capital market.Then we will from the USA the legal environment of private equity fund to study thelegislation of the United States for private equity funds by specialized private equityfund law to regulate the various stages of operation of the private equity fund matters.1982, the United States Securities and Exchange Commission promulgated the DOrdinance on the qualifications of the private equity fund of investment and itsvarious operational matters has made detailed provisions, also known as non-publicoffering of securities may be exempted from the obligation to register the rules, thisprovision is commonly known as the safe haven The terms. There is also having aregulatory aspect of the blue sky laws, the various states for the supervision of privateequity funds in accordance with this law. We will focused on the rational choice of the exit path of the private equity funds,reveals the advantages and problems of each path. As the current situation in China,the private equity fund by IPO is the dominant. But in practice, IPO is not suitable forall investors exit path in the choice of other exit path of the road, investors alwaysseem to hesitate. These years, China’s multi-level capital market has been initialdeveloping, this is also the exit route for private equity funds in China with morechoices. Before I try to commence by a variety of private equity funds exit path, itslegal issues involved in the detailed analysis to clarify the advantages anddisadvantages of each exit, for different needs and types of provide some usefulreference for investors in private equity funds in the future.Through the understanding of the development status of the private equity fundin China, drawing on relevant experience in the United States, combined with avariety of paths to exit the rational choice and put forward a few practicalrecommendations. First, the analysis of the current status quo of China’s privateequity funds, private equity funds can be seen in the development trend of China’sstrong. Then, we analysis from the perspective of capital markets and laws andregulations and related policies proposed to several suggestions, such as buildingmulti-level capital market and legal system, and the gradual opening up restrictionsfor the overseas IPO.