The lawyer team of Yang Chunbao believes that the main points of the formulation of the rules of procedure of the investment decision-making committee should include:

First, investment principles should be clarified. There are some investment principles that all private equity fund managers must always follow in the process of investing with the funds they manage, and these principles are all for investment projects. In summary, they are: high quality, reasonable valuation, and clear business model.

Second, investment criteria and investment restrictions should be clarified. As far as investment standards are concerned, since the purpose of fund investment is to make profits, the core of investment standards should be the financial indicators of the companies to be invested. As far as investment restrictions are concerned, it means that the industry or enterprise development stage that can be invested should be clarified. If there are no above-mentioned restrictions, the negative list of investment targets should be clearly selected.

Third, the formation and composition of the investment decision-making committee should be determined. For a corporate fund manager, the members of the investment decision-making committee should be determined in accordance with the company's "Articles of Association", usually nominated by the board of directors and approved by the shareholders' meeting. As for the partnership fund manager, it should be based on the provisions of the "Partnership Agreement", and usually it should be fully decided by the executive partner. In addition to clarifying how the investment decision-making committee is formed, the rules of procedure should also determine the specific number of committee members, composition and term of office, etc.

Fourth, the responsibilities and powers of the investment decision-making committee should be clarified. The main responsibility of the investment decision-making committee is to make decisions on the investment and exit of the fund. Regarding the decision-making authority, it also varies with different fund managers, but no matter what kind of decision-making authority, it should be determined based on the actual situation of the fund manager and combined with the total assets of the fund.

Fifth, the deliberation methods and reward and punishment measures of the investment decision-making committee should be clarified. The rules of procedure should clearly stipulate matters such as the convening process, meeting agenda, voting procedures and meeting minutes. In addition, the investment decision-making of the fund is related to the fundamental interests of the fund investors, and no negligence or negligence is allowed. Therefore, if the fund’s losses during the investment process are caused by the negligence and/or negligence of the investment decision-making committee, the relevant members should be punished. Corresponding penalties.

This article is an excerpt from the monograph "Private Equity Investment Fund Risk Prevention and Control Practice" by lawyers Yang Chunbao and Sun Zhen. If you want to learn more about the implementation points and reference templates, please pay attention to the recently published "Practice of Risk Prevention and Control of Private Equity Investment Funds", copy (or search) the link below to buy this book.

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https://u.jd.com/WIch5Wx