On The Management Rights Of Limited Partners

In order to promote the development of private equity funds anddiversify their organization forms, Partnership Law has been thoroughlyamended in2007, which leaves a particular chapter for the provisions oflimited partnership. Under the newly promulgated Partnership Law, thelimited partners (“LPs”) are prohibited to be involved in the managementof partnership, which is consistent with the traditional theory, and therebyprotecting the balance of rights and obligations between general partners(“GPs”) and LPs, as well as maintaining the trade security of creditors.However, since no liability is required to creditors if LPs execute theirmanagement rights under current law, so LPs of private equity funds, dueto their demands of interest, after bargaining with GPs, have alreadyparticipated in the management of partnerships by various means, therebymaximizing their benefits and avoid moral risks of GPs. Under suchcircumstances, if the issue of LPs’ management right is remainingambiguous, on one hand, the authority of laws and regulations willcontinue being challenged, and on the other hand, the realization of LPs’interest will face systematic obstacles, and therefore directly influencingthe development of private equity funds in our country. So, it is necessaryto explore the issue of the management rights of LPs.This paper firstly studies on the theoretical foundation of thelimitation on the management rights of LPs, discussing the practicaldemands of LPs to be involved in the management under current condition,and then through historical review, comparative analysis and theoreticalinspection, exploring the new mode for the management rights allocationunder new circumstances, based on above analysis, I further reconstruct the management rights of LPs under the Partnership Law, taking into accountthe present condition and the future development demands of China.