The Research Of The Private Equity Investment Protection

Private equity investment in recent years by the parties concerned, the privateequity market, as a part of modern capital market, is equally important as the stockmarket and the bond market. Moderately active PE market contributes to the circularmotion of the capital. At the same time, it is helpful to build a sound capital marketsystem, SME financing, industrial investment and science and technology reform. Forbusinesses, the scientific and normative PE investment is also the objectiverequirement of improving the internal governance. As a professional level ofinvestment and management capabilities institutional investors, PE can help theinvested company improve its internal governance. However, the problems, such as:high risk of PE, the existence of asymmetric information, the lack of China’s relevantlaws and regulations, make PE that looks like the hustle and bustle actually hidden alot of crises. In current environment the urgent issue is how to avoid investment risk,undermine the problems of system itself in order to protect the PE’s interests. In thisarticle, we sorts out the related issues in the process of PE and the application of ourlaws and regulations so as to regulate the PE process and protect the relevant interests.The paper is divided into three parts.In the part I I firstly make an brief overview of the meaning and characteristics ofthe private equity funds, then the introduce the PE protection.Based on it, I analyzethe operational phase of PE to offer the operational basis of the later framework of PEprotection. Besides that, I also pay attention to the ncessity of PE protection toconstruct the practical basis.In the part II I specific the architecture of PE protection. Specifically, it consists the core which is to select the priority as the investment tool and arrange the specialrights, accompanies a specialized mechanism and pluses two types of remedies. Thearrangement of the rights from the investment phase to the exit phase is to protect PEto operate smoothly. And the specialized mechanism is to encourage the managementof the invested company to create profits for the company. Lastly, I frame the tworemedies in order to ensure the rights and mechanism be applide.In the part III it mainly analyze legislative status and development dilemma aboutour country’s PE protection. Then I propose the reform measures, basing on theprotection framework. So we can make the PE protection grow and expand in China.