The Legal Research Of Regulation On Fund Manager In Private Equity Funds

Private Equity Fund (PE Fund) is the fund just opened to a few investors, not allinvestors, which invest in equity of Private Limited Company. The organization formsof PE Fund are company style, deed style, partnership style. As establishment of thepartnership enterprise law of the People’s Republic of China, the limited partnershipPE Fund play a very important role in PE Fund. It is because of the unique advantagesof limited partnership, which is the most efficient organization form for PE Fund. Atthe same time, its advantages cause the unequal between limited partner and generalpartner. The general partner run fund behalf of himself, and damaged limited partner’srights. There are many reasons. On one hand, PE Fund is a new things in China,investors are lack of invest experience, which make them can not supervise themangers. The managers are lack of management experience and professionalknowledge, cause moral risk easily. On the other hand, there is no regulation onmanagers, no Supervision department, no regulation laws, no Industry self-regulationmanagement, regulation of agreement of limited partnership is weak. Therefore, weneed to carry out regulations on manager.This paper is divided into four parts. The first part is the necessary of regulation on fund manager. First, we introducethe role of general partner and limited partner in the fund. Then, we introduce the fundinvest procedure in china. Limited partner do not run the fund, can not supervisegeneral partner. There is no regulation on general partner. So the moral risk is high.In part two, I analyze the law foundation of regulation on manager. It is fiduciaryduty. First I introduce the original and meanings of fiduciary duty. Then, I discuss thefiduciary duty of general partner, including Loyalty duty and caution duty.In the third party, I discussed the regulation on manager in Chinese law. The mainregulation is in the partnership law of china, and other specific laws on PE. Theregulation of agreement of limited partnership is weak.The last part, I propose some advice on Strengthen regulations on manager. First,we need to establish a specific supervise department, make a regulation laws. Second,industry association played an important role in self-regulation. Third, we shouldmake an experienced investors and managers, which make internal regulationpractical.