The Research On Economic Legal Issues Of Exit Mechanism Of Private Equity

Private Equity Fund is an operation mode of private placement fund investing in non-public companies’ equity, a modern financial instrument and investment system arrangement. The role it plays in raising funds in modern capital markets to boost businesses’ growth can not be ignored.Ever since its birth. Private Equity has always been considered as an elite game played by a minority, whose secrecy goes along with all its aspects of fund raising, investment, management and exit. The need for confidentiality in the protection of trade secrets or the investment process makes such a financial instrument even slightly mysterious. However, for the realization of premium, Private Equity,even being a private placement, still needs to seek to exit back into public markets and make contacts with the public during the process of exit, thus making the original minority capital operation possess the attribute of publicity and entered into the perspective of regulation by economic laws.Nevertheless, due to the industry’s own particularities and immature development, the phenomena of "market failure" and "government failure" appear frequently in the exit mechanism of the private equity investment fund industry. In respect of the "market failure" phenomenon, if the market is regulated purely by virtue of the idea of private law. substantive social fairness will be hard to achieve, while if the government increases its regulation of the market purely by virtue of the idea of public law, the development of Private Equity investment market might be excessively restrained. Therefore, it is essential to enhance the construction of relevant laws and systems under the existing legal framework in the perspective of economic laws, strengthen the supervision of legislation of the relevant exit mechanism and exit forms, and restrain and supervise the Private Equity investment funds in a moderate and reasonable way through government-oriented regulation and management supplemented by industry self-discipline under the government’s active intervention, to construct a reasonable organizational structure of the industry association, establish industry regulations and conduct code system, and carry out effective constraint and incentive on the market subjects and their conducts.In a word, only through the combination of the "visible hand" and "invisible hand", the strength of macro-control and improvement of the construction of the relevant market system, can the Private Equity Fund industry develop vigorously and give full play of its role of achieving value appreciation through resources integration on the premise of a legitimate and orderly exit system, and ultimately serve the development of China’s economy.