Trust-based Private Equity Fund Legal Risk Control

Trust Private Equity Fund, a partnership of private equity funds and corporate private equity funds, private equity funds in recent years, many scholars research on private equity funds, but specifically for the study of trust-based private equity fund, but very few. In2001, the Trust Law of the trust system truly has been established in China, but when people are still unfamiliar with the trust-based private equity fund. With the entry into force of the2007"trust management approach" and "trust assembled funds trust scheme management approach", as well as the2008Trust Private Equity Investment Trust Operational Guidelines for the formal introduction of trust-based private equity fund gained unprecedented opportunities for development. Trust-based private equity fund property independence reduces the operational risks of the private equity fund, trust-based private equity fund time has come. But in practice, the trust company to develop trust-based private equity fund business has been difficult, there own transaction structure internal risks as well as our trust-based private equity fund legal system is imperfect external risks. Therefore, in this article from the trust company to carry out the trust-based private equity fund business start with internal and external legal risk, by reason of the trust-based private equity fund’s internal risk and external risk analysis and put forward their own perfect Trust Private Equity Fund the recommendations of the internal risk management and control mechanisms and external legal environment healthy and sustainable development, to the investment in the form of trust-based private equity fund with a unique organizational advantages.This paper is divided into five parts. The first part introduces the meaning and mode of operation of the trust-based private equity fund, First, the meaning of the trust-based private equity fund:promoters initiated to raise investors, investors trust contract entered into with the promoters, according to the contract, the investment funds entrusted to the promoters, sponsors the funds regroup investment, mainly for equity investments in non-listed companies, and finally gains the trust contract issued by the promoters to the way of investment in human capital management. Such funds management style is both an investment tool is also a financial management tool, investors will be as an investment tool, and trust companies to it as a financial management tool. That meaning is clearly highlighted the core of the trust-based private equity fund that "trust" is different from other types of private equity funds. Followed by analysis of the characteristics of trust-based private equity fund, the organizational advantages Trust Fund and private equity trusts distinction. The emphasis in this part of the independence of its property, to avoid double taxation, and low operating costs of organizational advantage, so to say, trust-based private equity fund in China should be the long-term development to go on. The same time, with the distinction of private trust funds, equity trust, clarifying the boundaries of the trust-based private equity fund and private trust funds, equity trust, to lay the foundation for the subsequent analysis. Finally, the introduction of the four trust-based private equity fund mode of operation, namely:Trust+mode trust-based private equity fund limited partnership, cooperative management model trust-based private equity fund, managed mode private equity fund, financing channel trust-based private equity Fund.The second part of the analysis of the structure of a trust-based private equity fund transactions, on the one hand, from the macro level research the trust existing private equity funds and fund-raising stage involved in illegal fund raising, poor management of the trust company, custodian bank unauthorized transfer of funds, target enterprise prior fraud and post non-standard operating and legal risks, internal control mechanisms to construct a trust-based private equity fund to pave the way for the later. On the other hand, from microscopic Trust Private Equity Fund four different modes of legal risk research to find the most trust company to carry out the trust-based private equity fund in the four modes.The third part through the legal environment in which our trust-based private equity fund analysis, external legal risks brought about by a lack of trust-based private equity fund in China’s legal system, improve the trust-based private equity fund external risk control mechanisms lay the foundation. This section first analyzes the legal risks that the absence of trust property registration system to the development of trust-based private equity fund in China. The same time, it is also this lead to lack of trust principal position and trust-based private equity fund IPO exit channels are sluggish. Followed by analysis of the trust-based private equity fund our current tax system, to study the legal risks of uncertain tax benefits to a trust-based private equity fund, trust-based private equity fund so can not really play the avoidance of double taxation of organizational advantages. And because China’s current tax system is applied in practice, so that the heavy tax burden of the trust-based private equity fund, even if there are some tax incentives are also for trust-based private equity fund is invested enterprises, not really for the trustee and delegate the tax incentives, which dealt a severe blow to the enthusiasm of investors and Trust Company, which hinder the development of a trust-based private equity fund. Third, our analysis of the regulatory mechanism of trust-based private equity fund, the legal risks of our trust-based private equity fund regulatory mechanism is not perfect. Although, compared to the corporate private equity funds and partnerships, trust-based private equity fund is the only form of private equity funds are included in the financial regulatory nominally regulated by the China Banking Regulatory Commission, but in practice, the SFC held by a trust company listed the negative attitude of the company’s equity, trust-based private equity fund IPO exit channels are sluggish. Although the CBRC promulgated the "Trust Company Operational Guidelines for Private Equity Investment Trust, explicitly trust-based private equity fund can exit through the IPO, but before the SFC and the China Banking Regulatory Commission did not do a good job coordination, to talk about the IPO exit is on paper. Trust Private Equity Fund IPO exit channels poor analysis, research trust fund of private equity exit channels and the main reason is the lack of trust property registration system led to a dominant position of missing. However, the establishment of the Trust registration system is a long historical process, so trust-based private equity fund continued development must find a new exit channels. Finally, the Trust Private Equity Investment Trust Operational Guidelines "feasibility analysis, research Although the guidelines of trust companies in many ways to carry out the trusts private equity fund business has made detailed provisions, but many aspects of does not have the maneuverability, further demonstrates our trust-based private equity fund does not sound legal environment in urgent need of the operability of the introduction of new laws and regulations.The fourth part is optimized for the internal legal risks mentioned in the second part of the Trust Private Equity Fund Trust private equity funds measures of internal control mechanisms. Optimized trust-based private equity transaction structure on the one hand, from the internal control of the trust-based private equity fund based on the internal structure of the legal risks, including the capital injection stage legal and financial due diligence of target companies, hosted previously signed with banks written agreement to establish a prior restraint mechanisms regulate the trust companies, the fund-raising stage a clear distinction between the illegal fund-raising. From the four aspects of the proposed recommendations, in order to ensure that the trust-based private equity fund raising stage will not evolve into illegal fund-raising, economic crimes; moral hazard in trust company management does not appear to damage the interests of the client; bank custodian will not be a legal risk, to ensure the safety of the trust property; looking for the target company, will not target corporate fraud led to bad business trust-based private equity fund termination, so that the damage to the interests of the principal and the agent. On the other hand the risk control mechanism, improve the trust-based private equity fund in each mode can strictly control the risk, regardless of the trust companies in which trust-based private equity fund business and avoid risks. Of course, in these different kinds of trust-based private equity fund avoid risks recommendations Trust also pointed out that the the+limited partnership mode trust-based private equity fund is a private equity fund of several trust risk minimization, and exit channels for the most unobstructed species. I suggest that in the next period of time, especially in the case of trust-based private equity fund legal system is not perfect, trust companies can be the Trust+limited partnership private equity funds as an innovative way bold attempt.The last part of the risk for the third part of the analysis of our trust-based private equity fund legal environment, put forward suggestions for improvement, this part of the recommendations to improve the external legal environment of trust-based private equity fund mainly from four aspects. First, to improve the trust property registration system, which is a key link in the development of trust-based private equity fund, because it is not only related to the independence of trust property in the trust-based private equity fund, also related to whether exit through IPO safety. This part is mainly from the to improve relevant registration regulations, to clear registration agency clearly registration effectiveness, build trust property registration system clear which aspects of the registration items. Second, improve the tax system. This part of the problem exists for trust-based private equity fund tax system, the own bold legal concept, including:reduce the tax burden of the trustees, equitable tax status given to a trust-based private equity fund, the beneficiary tax, elimination of double taxation, investment implementation of tax incentives to withhold these five aspects of the introduction of a capital gains tax, to play a role in promoting trust-based private equity fund tax legislative process. Third, to improve the trust-based private equity fund regulatory mechanism. This part of the problem from the unified regulatory requirements for trust-based private equity fund regulation exists to coordinate the relationship between the government regulatory body, strengthen self-regulatory coordination of these two aspects of the relationship with government regulators to put forward their own suggestions of sound regulatory mechanism. Fourth, improve the exit channels. The private equity fund investors are financial investors rather than equity investors, and the purpose of their investment capital appreciation and bring considerable benefits, not owned or controlled entities, so exit channel is an important part of the private equity fund, trust-based private equity fund must be perfect exit channels. This part from the reality of looking to the RTO including the use of over-the-counter trading trust-based private equity fund security exit using the trust-based private equity fund security exit, use of overseas listing of the trust-based private equity fund security exit using GEM trust-based private equity fund security out of the four exit channels, to promote the development of trust-based private equity fund.