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Research On The Legal Issues Of Internal Governance Of Limited Partners PE

Posted on:2015-12-09Degree:MasterType:Thesis
Country:ChinaCandidate:X KeFull Text:PDF
GTID:2296330464956243Subject:Civil and Commercial Law
Abstract/Summary:PDF Full Text Request
Private Equity Fund is one of the most important investment tools in capital world and is even called "the kings of Wall Street." These hulking pools of capital raise billions from large institutional investors, particularly pension funds, endowments, and the insurance industry. They invest these resources in a wide range of companies, form star-up technology firms to mature enterprises. A peak at the results of some of these funds makes their managers seem prescient, almost psychic. Many of today’s most famed public companies, including Apple, Cisco Systems, Google and Sun Microsystems, among others, relied on initial seed money from private equity funds. In return, many of these funds have realized outsized gains for their investors and managers.Interestingly, many funds are often organized as unincorporated entities, usually limited partnerships. The investors are "passive" or limited partners (LP). The fund manager serves as the general partner (GP) charged with choosing firms or portfolio companies in which to invest and managing those investments. As commentators have noted, however, the structure of the relationship between these investor and their fund managers tends to create several obstacles for investors to monitor how their investments are deployed. This can be problematic, because managers and investors frequently turn out to have divergent interests. The consequences of divergent interests are present in any agency relationship where the agent has discretionary power to affect the interest or property of the principals. But doing something about the divergent interests of managers and investors is not easy. Strong legal checks on agent misbehavior may be one answer. Private enforcement or monitoring through contract design may be another.Chapter Three describes the limited legal rights of investors in private equity juxtaposed against the vast discretion of fund managers. As will be shown, investors in private limited partnerships by default have few legal rights to participate in day-to-day operations or challenge decisions of managers. Discussing about expanding the managing right of LP in private equity seems reasonable and necessary. Meanwhile, another important point that how to keep balance between the principle of limited liability and the Limited Partner’s outspread management right will also be analyzed in the second part of the this chapter.Lastly, I will discuss the current development situation of Limited Partner PE in China. The main content is about the introduction of its dilemma and analyses the reason hereof combining the first three chapters. Based on this, there are some positive approaches for solving or relieving the problems. Most of them are from the angles including but not limited in Chinese law institution, commercial culture of investment and successful experience from mature market.
Keywords/Search Tags:Private Equity, Limited Partnership, Enthusiasm Mechanism and Constraint Mechanism, Fiduciary Duty
PDF Full Text Request
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