Legal Trends in the Private Equity Industry (July 2023 / Issue 65)
The legal service dynamics of Yang Chunbao's lawyer team
1
Lawyer Yang Chunbao cooperated with ZHI10.com to launch
Private Equity Investment Risk Control Clause Course
2
Lawyer Chunbao Yang and Lawyer Guo Zekun
assisted the fund of GTJA Investment Group
to complete the lead investment in Kanovabiopharma
Recently, Suzhou Kanovabiopharma announced the completion of a new round of financing of over 100 million yuan, led by GTJA Investment Group, Beijing Life Garden Venture Capital, Guangzhou Xintai, Yangzhou Fengsheng, Hetang Innovation, and Northern Light Venture Capital , Chende Capital and other well-known financial institutions followed suit. Lawyer Yang Chunbao and Guo Zekun acted as the legal counsel of GTJA Investment Group, and assisted its funds to complete this investment.
Kanovabiopharma was established in 2015. The founder is Academician Dong Chen, an internationally renowned immunologist and the discoverer of Th17 cells. The company focuses on the development of macromolecular drugs in the field of autoimmune diseases and immuno-oncology. Relying on the world-renowned scientific advisory committee and the returnee R&D core team that has been deeply involved in the field of antibody drugs for more than ten years, the company has built a high level of innovative antibody R&D core technology The platform, through the combination of solid basic science and translational medicine, already has a number of research and development projects with independent intellectual property rights, and the product pipeline covers a wealth of indications in the fields of autoimmunity and tumors.
Various announcements and reports of the Fund Industry Association
The Asset Management Association of China (hereinafter referred to as the "Association") issued announcements on July 14, 2023 and July 28, 2023 to cancel 14 companies including Zhejiang Murong Asset Management Co., Ltd. and Shanghai Longwu Asset Management Co., Ltd. Continue to register private equity fund managers who meet the manager registration requirements, and issue an announcement on July 14, 2023 to cancel Zhenghao (Guangzhou) Private Equity Securities Investment Management Co., Ltd. and other 12 private equity fund management companies that have not submitted special legal opinions after the deadline person registration, and enter the aforesaid circumstances into the securities and futures market integrity archives database.
On July 26, 2023, the Association issued the "Notice on Filling in the 2023 Annual Fund Manager's Green Investment Self-Assessment Form", stating that it is now conducting a 2023 annual self-assessment survey for asset management institutions, and the self-assessment form is filled in for those with green investment. An institution for investment strategy, green investment research, or green investment practice. If the same manager is concurrently engaged in securities investment and equity investment business, both versions may be filled out at the same time; parent and subsidiary companies may fill out the self-assessment form independently. The deadline for the questionnaire survey is August 18, 2023.
Regular Trends
On July 9, 2023, the State Council officially promulgated the "Regulations on the Supervision and Administration of Private Equity Investment Funds" (hereinafter referred to as the "Private Equity Regulations"), which will come into force on September 1, 2023. The Private Equity Regulations have seven chapters, including general principles, private equity fund managers and private equity fund custodians, fundraising and investment operations, special regulations on venture capital funds, supervision and management, legal responsibilities, and supplementary regulations. Regarding the content of the special chapter on venture capital funds in the private equity fund regulatory regulations, Yang Chunbao's lawyer team interpreted various policies and regulations related to venture capital funds in combination with the regulations issued by the regulators on venture capital funds. For details, see "Combining Private Equity Fund Regulatory Regulations Talk about venture capital funds." (https://mp.weixin.qq.com/s/Cizd2RKQ5VWgw76gFucr1w)
The Association issued the "Guidelines for Handling Disappearance of Private Equity Fund Managers" on July 14, 2023, which will come into effect on the date of issuance. The "Guidelines" stipulates the basic requirements for contact information and information submission of private equity fund managers, as well as the consequences of violations, and clarifies the identification process of lost private equity fund managers and the handling process for lost private equity fund managers, including loss of contact publicity, The termination of the public announcement procedure for the loss of contact, the cancellation of registration, and the private equity fund manager and its controlling shareholder, actual controller, general partner, legal representative, executive partner and its appointed representative, and responsible senior managers who have been canceled due to loss of contact The legal responsibilities of management personnel and directly responsible personnel, etc. The "Guidelines" is attached with a list of information on the basic situation report of private equity fund managers who have lost contact.
On July 14, 2023, the Association issued the "Measures for the Recordation of Private Equity Asset Management Plans of Securities and Futures Operating Institutions", which will come into force on the date of issuance. The "Administrative Measures for the Recordation of Private Equity Asset Management Plans of Securities and Futures Business Institutions (Trial)" issued in June 2019 will be abolished simultaneously. Compared with the abolished trial measures, the main revisions of the filing measures include: emphasizing the active management responsibilities of managers; clarifying the principles and specific requirements for hiring investment consultants for asset management plans; emphasizing that direct or indirect participation in structured bond issuance is not allowed , requiring that products invested in a single bond account for more than 50%, the leverage ratio shall not exceed 120%. At the same time, it is clarified that managers should carefully select bond investment strategies, focus on abnormal bond transactions, and effectively identify structured bond issuance; refine the management and control of related transactions , requiring managers to carefully evaluate various related transactions; further emphasizing that they must not guarantee capital and income, and must not engage in prohibited behaviors that conflict with asset management; closed-end asset management plans that allow equity investment can expand the scale of fundraising. The total amount of new funds raised shall not exceed 3 times the amount raised at the time of establishment, but the 3 times limit may be appropriately exempted in circumstances such as the participation of pension funds; the asset management plan for employees who follow-up in equity investment may be exempted from portfolio investment by professional investors and the minimum The investment amount is required to be 10 million yuan, but the basic initial investment amount requirement of 1 million yuan should still be met; the nesting layer rules are optimized, and the asset management plan for equity investment indirectly invests in the target equity through a special purpose vehicle (SPV), and the SPV is not included The number of nesting layers; asset management plans that allow equity investment to include reasonable expenses such as due diligence in the planned property.
The Association released the "Self-discipline Inspection Rules of the Asset Management Association of China" on July 14. Determine the appropriate inspection methods and methods, as well as specific rules for on-site inspections and off-site inspections.
On July 4, 2023, the Association released information stating that recently, the first working meeting of the Venture Capital Fund Committee in 2023 was successfully held in Nanchang. The meeting emphasized that the "Regulations on the Supervision and Administration of Private Equity Investment Funds (Draft)" recently reviewed and approved by the State Council marks the development of the industry has entered a new stage. , Strengthen research to solve difficult and painful problems, strengthen industry culture construction and positive publicity and other key tasks.
On the afternoon of July 13, 2023, the Association held a symposium on the Regulations on the Supervision and Administration of Private Equity Investment Funds. Fang Xinghai, vice chairman of the China Securities Regulatory Commission, pointed out in his speech that, first of all, the introduction of the private equity regulations is an important measure to implement the decision-making and deployment of the Party Central Committee, an urgent need to further consolidate the foundation of the rule of law in the industry, and an important guarantee for the realization of high-quality transformation and development of the industry. Secondly, the Private Equity Regulations have made a series of institutional arrangements in terms of market access, business development requirements, registration and filing, fundraising, investment operations, supervision and management, and responsibility allocation, showing a clear registration and filing system and setting the behavior of various market entities. Highlights such as standardization and improvement of market-oriented restraint mechanisms. Finally, it is necessary to do a good job in the publicity and education of laws and regulations, promptly carry out a comprehensive cleaning and reconstruction of rules and regulations, expand private equity fund-raising channels, and strengthen administrative supervision and self-discipline management.
Typical Case
1. If the operational measures made by the managers of private equity asset management products based on their own professional judgment do not violate the contractual agreement, laws and regulations, and the provisions of financial regulatory authorities, and have already strived for the best interests of investors at the current stage, investors cannot arbitrarily interfere with the management normal exercise of managerial duties
Case
Wang Moumou and Ping An Wealth Management Co., Ltd. and other private equity fund contract disputes [(2022) Shanghai 0115 Minchu No. 50460]
Main Facts
Referee's Point of View
After the trial, the court held that, first, the issue of whether the early exit caused the loss of Wang Moumou's income. According to the "Partnership Agreement", the duration of the limited partnership is 5 years from the initial delivery date, the first 3 years are the fund operation period, and the period until the expiration of the duration is the exit period. The withdrawal of the partnership enterprise involved in the case complied with the contract. First of all, equity investment has considerable risks. Uncontrollable factors such as the market environment and regulatory policies will bring great uncertainty to the asset management plan involved in the case and the operation of the underlying assets. If Ping An Dingchuang rejects the withdrawal consultation of overseas funds, It may cause overseas fund entities to miss this steady exit opportunity and fail to obtain an exit plan that maximizes benefits. Secondly, Ping An Ding Creation, as the manager of Dingke Music Review, has a certain right to make decisions, whether it is in terms of the "Partnership Agreement" or based on the above discussion. In the end, Wang Moumou did not have actual investment losses in this case, but obtained considerable wealth management income due to Ping An Ding Chuang's withdrawal decision. Assuming that there is no early exit, the more income obtained is essentially an expected benefit, not an investment loss. Therefore, the exit decision made by Ping An Ding Chuang did not infringe on Wang Moumou's right to investment income.
Second, there is a question of whether Ping An Dingchuang and Caitong Asset Management treat investors differently. Caitong Asset Management established the "Ping An New Wing Asset Management Plan" and the asset management plan involved in the case as two independent investment products, regardless of the investment time, investment cost, expected income, duration and purchase price of the underlying project. Significant difference, the two are not comparable in terms of exit time. Specifically, the investment time of the underlying projects is different, the expiration date of the duration is also different, and the probability of completing the exit within the duration is also very different. On the other hand, equity investment has extremely high risks and uncertainties. If the "Ping An New Wing Asset Management Plan" exited after the listing of the project involved in the case and suffered losses, Wang Moumou would not propose that Ping An Dingchuang and Caitong Asset Management treat investors differently. It can be seen that it is not reasonable to judge the possible return of investment based on the possible expected return in the future to match the investment risk. Therefore, the court did not accept Wang Moumou's grounds for making an analogy with different fund projects. Therefore, Wang Moumou's request for Ping An Dingchuang and Caitong Asset Management to compensate him for financial loss and interest has no factual and legal basis, and the court will not support it.
2. The fund contract is a series of rights and obligations arrangements between the fund client, the manager and the custodian for the investment management of the fund. For example, the private equity investment fund contract stipulates that the transfer of fund shares must be approved by the fund manager. Sending the transfer notice to it does not produce the legal effect of fund share transfer, and the transferee does not have the subject qualification to sue the fund manager based on the fund contract
Case
Dong Moumou and Lide Asset Management Co., Ltd. entrusted contract dispute [(2023) Shanghai 0115 Minchu No. 52795]
Main Facts
Referee's Point of View
Author
Lawyer Yang Chunbao
First class lawyer
Senior Partner of Dentons (Shanghai) Law Firm
Mail:
chambers.yang@dentons.cn
The leader of the private equity and investment fund professional group and the TMT industry group leader of Beijing Dentons (Shanghai) Law Firm, the deputy director of the Dentons China Technology, Culture, Leisure and Entertainment Professional Committee, and a member of the Shanghai foreign-related legal talent pool. Bachelor of Laws from Fudan University (1992), Master of Laws from University of Technology Sydney (2001), Master of Laws from East China University of Political Science and Law (2001).
Lawyer Yang has been practicing for 28 years and has long been engaged in legal services for private equity funds, investment and financing, and mergers and acquisitions, covering TMT, big finance, big health, real estate and infrastructure, exhibition industry, manufacturing and other industries. Since 2004, he has been specially recommended or commented by The Legal 500 and Asia Law Profiles for many times. Since 2016, he has been continuously selected as one of the "100 outstanding lawyers in China" by the internationally renowned legal media China Business Law Journal, and won the "Leaders in Law - 2021 Global Awards" China Annual Company Law Expert" title; listed in the first "Excellent Lawyers & Law Firms Recommended by China's Famous Enterprise Law Firms" recommendation list; won several awards such as "China TMT Lawyer Award" and "China M&A Lawyer Award" by Lawyer Monthly and Finance Monthly . He is qualified as an independent director of a listed company. He is a part-time professor of the Law School of East China University of Science and Technology, a part-time tutor of the Law School of Fudan University, a part-time postgraduate tutor of East China University of Political Science and Law, a lecturer of the private equity president class of Shanghai Jiaotong University, and a lecturer of the transnational management talent training class of the Shanghai Municipal Commission of Commerce. Published 16 monographs including "Practical Operation and Case Analysis of Enterprise Legal Risk Prevention and Control", "Winning Capital 2: Complete Operation Guide for the Company's Investment and Financing Model Process", "Practice of Risk Prevention and Control of Private Equity Investment Funds". Lawyer Yang's practice areas are: companies, investment mergers and acquisitions and private equity funds, capital markets, TMT, real estate and construction projects, as well as dispute resolution in the above fields.
Author
Lawyer Sun Zhen
Partner of Dentons (Shanghai) Law Firm
Mail:
sun.zhen@dentons.cn
Author
Li Jiaxin
Dentons (Shanghai) Law Firm Assistant Lawyer
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