Analysis On Legal Obstacles Of Exiting Through Listings By Trust-based Private Equity Fund

Pursuant to Article15of Operational guidelines of the Private Equity Businessfor trust company, in the management of private equity investment trusts, the trustcompanies could withdrawal their investment through going listed of the investedenterprises, equity transference, equity repurchase by the invested enterprises, equityallocation. However, in the reality, there are obstacles in the exit mechanism of Trust-based Private Equity Fund. Analyzing the causes of obstacles, there are five aspects:First, the legal status of the investment advisers do not comply with practicalneeds. Having less experience in practice, trust company often cooperate with aninvestment advisers, which serves as the role of Trust Fund investment managers inpractice under some circumstances. However, due to the legal status of investmentadvisers are inconsistent with reality, resulting in lack of regulation of investmentadvisers in some cases. At the same time, Operational guidelines of the Private EquityBusiness for trust company sets up strict threshold to serve as investment adviser, andit shut out some management companies which have strong professional abilities butshort of funds.Second, the law does not expressly provided effective registration requirementsfor the trust property. According to present law, the registration of the trust property isnot obligatory at the time of establishment of Trust-based Private Equity Fund, butwithout registration, the scope of the trust property is difficult to define, thereby causing that related party transactions can not be identified and the identity of thequalified promoters of a listed company can not be obtained by the Trust-basedPrivate Equity Fund.Third, there are obstacles in the process of disclosure of actual controller of theIPO enterprise. Some scholars believe that trust companies’ obligations ofconfidentiality to their clients are conflict with the disclosure obligations, so the Trust-based Private Equity Fund would not be considered as a qualified sponsor of listedcompanies.Fourth, the related party transactions of trust companies is difficult to control.Compared to normal companies, trust companies have two types of special relatedproperties–its own property and the trust property. However, the imperfect of trustregistration system makes these two types of property more difficult to define.Fifth, the changes of investors are hardly to control. One view is that if Trust-based Private Equity Fund of listed companies can be considered as qualifiedsponsors, it might lead to the changes in investors get out of control. Then a tradingmarket above the level of shareholders of listed companies might formed. Thepromoters of listed companies, executives, controlling shareholders and actualcontroller will take this measure to circumvent the provisions of the legal restrictionon transfer of equity of listed companiesFacing the obstacles of Trust Private Equity Fund when withdrawal throughlistings, it appeared a lot of alternative measures, which also have their owndrawbacks. This thesis probe into the obstacles of Trust-based Private Equity Fundindividually and makes some recommedations, hoping to find reasonable solutionsabout this problem.Finally, the author proposes that the final solution of this problem still dependson the cooperation of the regulatory agencies. Under the established pattern of theseparate supervision of domestic financial markets, creating a coordinationmechanism and information sharing platform between the different regulatoryagencies are necessary. Financial regulatory agencies should take the initiative toreach a consensus as soon as possible, focusing on the behavior of circumventing the law by using Trust. At the same time, the central bank should establish a informationsharing platform of financial supervision as proposed by many domestic scholars, inorder to speed up financial development and maintain the financial stability.