The Research On Supervision Of Limited Partnership Private Equity Fund

PE funds, as one of the main forms of PE investment, have been changing witheach passing day. Among these, limited partnership PE funds become favored by PEindustry for its own advantages, including investment system, flexible managementstyle, effective operation cost, risk control of agents and investors, lax industrialsupervision. After “Limited Partnership” was confirmed by amendment of“Partnership Enterprise Law of PRC” in2007, Limited Partnership PE Funds isdeveloping rapidly in number of organization and amount of investment and playingan important role in investing medium-sized and small enterprises, promotingreconstruction and reorganization of state-owned enterprises, facilitating technicalinnovation, ensuring employment rate. However, the domestic industry develops for arelatively short period. Further supervision, especially protection of limited partners,is necessary while Limited Partnership PE Funds are booming. As limited partnersbear main investment obligations, protection of them is indeed the most importantpart of the whole supervision of PE Funds market. If limited partners’ interests are notguaranteed effectively, they will lose confidence in PE funds. Without investment andinitial establishment, PE funds will shrink and even become extinct.Based on two biggest important issues in damaging interest of limitedpartners——a lack of integrity of GP and improper distribution of management power, and legislative experience of America and other countries for reference, this paperemphasizes how to protect limited partners through supervision organizations andimprovement of supervision measures.Chapter I explains the definition and classification of PE funds, as well asconnotation of PE funds and development status in China through comparison.Chapter II analyzes differences of GP and LP in legal status and roles, two issues ofimbalance inside partnership caused by such differences——a lack of integrity of GPand improper distribution of management power, and then give further explanationabout the reason and damage of the two issues。Chapter III states the changes andstipulations of “ULPA(United Limited Partnership Act, U.S.A)” in order to findpractical ways for later advices as America is the most advanced country in the worldwith respect to PE funds。Chapter IV presents disadvantages of our country, based oncomparison of American legislative stipulations, and puts forward more activemeasures to protect the rights of investors by improvement of supervisionorganizations, specification of subject qualifications, confirmation of integrityobligation, proper allocation of management power, enlargement of supervision rightof investors under the precondition that the mode and rule of supervision are specified.In the part of conclusion, this paper emphasizes the significance of protecting interestsof investors to the industry of PE funds and Chinese financial development.