Private placement regulations officially come into effect

Private equity fund manager registration and

Private investment fund registration business service guide released

Equity funds are allowed to increase their holdings of shares of companies

listed on the Beijing Stock Exchange

China Securities Regulatory Commission plans to comprehensively revise

the private equity fund regulatory system

Private equity fund filing guidelines

and updated list of supporting materials released

On September 28, 2023, the Association issued the "Private Investment Fund Registration Guidelines No. 1 - Private Securities Investment Funds", "Private Investment Fund Registration Guidelines No. 2 - Private Equity and Venture Capital Funds" and "Private Investment Fund Registration Guidelines No. 2". No. 3 - Change of Manager of Private Equity Investment Funds" ("Recording Guidelines No. 1", "Recording Guidelines No. 2" and "Recording Guidelines No. 3"). Filing Guidelines No. 1-3 were drafted by the Association after integrating and optimizing the existing fund filing self-regulatory rules and scattered filing standards in key points and cases, and revised the list of relevant materials.

Specifically, Filing Guideline No. 1 is for private securities investment funds, adding new disclosure requirements on important information such as investment managers and fund investment advisory agencies in the fundraising promotion materials; it is explicitly prohibited to avoid short-term redemption of fund shares and other methods. Requirements such as minimum capital contribution and completion of fundraising; clarify that changes in investor subscription (subscription) and redemption time, frequency, procedures and restrictions require the consent of investors; clarify rules for temporary open days; clarify changes in investment scope or investment proportion Allow investors to redeem when restricted; clarify the differentiated settings for different fund share categories; clarify the interval for accruing performance compensation and the prerequisites and exceptions for accruing performance compensation for the part that exceeds the accrual basis; clarify the work experience of investment managers Requirements; in terms of major changes, a letter explaining new changes is a required submission material; physical distribution is allowed with the consent of investors after completion of liquidation, etc.

Filing Guideline No. 2 applies to private equity and venture capital funds, emphasizing that the fundraising promotion materials submitted should be those actually used in the fundraising process; adding key persons (if any), members of the investment decision-making committee (if any) and "Important information" that should be disclosed in the fundraising promotion materials such as the status of the proposed investment project (if any); clearly exempting insurance funds and special investors such as government-funded industry investment funds at or above the prefecture level from the first paid-in capital contribution limit; clearly prohibiting private equity funds The manager carries out multi-manager or channel business; clarifies the requirements of the dual-GP structure for the manager; clarifies the investment scope of private equity funds and the scope of assets prohibited from investment by venture capital funds; clarifies the conversion conditions and subsequent operations of convertible bond investment Requirements; clarify matters related to the investment structure that managers should disclose to investors; clarify requirements for maturity mismatches between private equity funds and upper-level funds or lower-level asset management products; clarify that managers need to make clarifications if management fees are not charged or management fees are obviously too low. Explanation; clarify the three-fold limit on open subscription or subscription of private equity funds, exemptions from restrictions, and information disclosure obligations of managers; propose requirements that need to be met for overdue fund filing; a letter explaining new changes is required for major changes. Prepare reporting materials; allow in-kind distribution with the consent of investors after completion of liquidation; handle the cancellation of new funds; provide dedicated personnel and post-processing services for venture capital funds, and optimize fund expansion restrictions in a targeted manner, etc.

Filing Guideline No. 3 mainly clarifies the change procedures and material requirements for the change of managers of registered private equity funds, distinguishing between the differentiated change requirements for the original manager's normal operation and the situation of incapacity such as cancellation or loss of contact. In this regard, Yang Chunbao's legal team wrote the article "Seven Questions and Answers on Changing Managers of Private Equity Funds" (https://mp.weixin.qq.com/s/tZ8BjV3RCtMx3nn0YO3tWg), which discusses matters related to the change of managers of private equity funds in the form of questions and answers. Be explained.

After the release of Filing Guidelines No. 1-3, the association will handle fund filing, filing information changes and liquidation in accordance with relevant requirements. Existing funds will not be affected if there are no changes involved. The association simultaneously revised the list of filing materials for private equity funds, and the supporting filing guidelines were released at the same time. After the filing guidelines and materials list are released, the "Private Investment Fund Filing Instructions", "Private Investment Fund Filing Points of Attention" and related materials lists will be abolished at the same time.

In a private equity fund share transfer transaction, the fact that the transferee is not registered as a fund investor does not affect the effectiveness of the transfer of fund shares; the transferee cannot simply because the fund manager failed to conduct an investor suitability review when transferring fund shares. , advocating for the termination of the fund share transfer agreement

Transaction dispute between Hong and Shanghai Rolling Stone Investment Management Co., Ltd. and other securities investment funds

[(2023) Shanghai 74 Min Zhong No. 541]

Current laws, regulations and relevant regulatory rules do not stipulate that the transfer of private equity investment fund shares should be subject to registration as a requirement for effectiveness or a requirement for confrontation. The Rolling Stone No. 7 fund transferred by Hong is a private equity investment fund. His failure to register as an investor does not affect the validity of the transfer of the disputed fund shares. Therefore, Hong’s claim that the purpose of the contract could not be realized and he requested to terminate the contract cannot be established.

In addition, the issue of investor suitability involves the distribution of responsibilities between investors and providers of financial products and services. If the appellant Hong believes that his investment losses have occurred, Rolling Stone and Wang did not conduct a suitability review on him as an investor, and they should bear corresponding liability for compensation and may make separate claims. The court of second instance dismissed the appeal and upheld the original verdict.

If the manager fails to conduct a detailed investigation of the investment target and underlying assets as stipulated in the fund contract (including due diligence and review of other shareholders/partners of the investment target, and the flow of funds invested in the underlying assets by the investment target), the manager fails to conduct detailed investigation of the investment target and the underlying assets. If you invest in the underlying assets and conduct any reasonable post-investment follow-up management, and fail to disclose the equity holdings of the underlying assets invested in the investment target, you may be deemed to have seriously violated the manager's duties and need to compensate investors for their losses.

Contract dispute between Wang Moumou and Shanghai Jupai Investment Group Co., Ltd. and other private equity funds

[(2022) Shanghai 0115 Minchu No. 37508]

The court held that during the fund investment stage, the "Fund Contract" involved in the case clearly stipulated that the funds raised by the fund were mainly invested in Ming'an Wan, a partnership established by SDIC Ming'an as the executive partner and Huiyin Aofeng as the general partner. Hu, Ming'an Wanhu mainly makes equity investments in Saurer Intelligent. As the fund manager, Juzhou Company shall diligently and responsibly manage the fund assets in accordance with the agreement and conduct detailed investigations on the investment targets within the investment scope. Juzhou Company used the Ming'an Wanhu Partnership as a channel for investment, but did not conduct due diligence on its partner Huiyin Aofeng. It also never raised objections to the unusual situation that the partner registered with the partnership's industrial and commercial registration was not Huiyin Aofeng. We also investigated the reasons and found that it was impossible to prove that the "Partnership Agreement" was authentic and had been performed as agreed, which was contrary to the close cooperation model between general partnership partners and the basic responsibilities of prudent review and risk control that fund issuers should perform. .

During the fund management stage, Juzhou Company also made obvious mistakes: First, Juzhou Company did not take the initiative to verify and review the capital flow of Ming'an Wanhui through bank inquiries and other channels. Hu's transfer transaction amount of 231,000,000 yuan is also inconsistent with the equity transfer price of 350 million yuan agreed in Saurer Intelligent's "Equity Transfer and Investment Agreement". Juzhou Company is not sure whether Ming'an Wanhu will use the fund funds for the transferred listed company. Saurer Intelligent Equity failed to perform its due diligence obligations. Second, Juzhou Company failed to verify the list of shareholders of Ming An Wanhui’s investment target (i.e. Saurer Intelligence), nor did it conduct any reasonable post-investment follow-up management of Saurer Intelligence, nor did it truthfully, accurately, timely and fully comply with the law. Juzhou Company failed to fulfill its due management obligations by disclosing information on fundraising targets. Third, for the equity holding part, the "Fund Contract" stipulates that Ming'an Wanhu Fund will directly obtain the equity of the investment project. The risks of entrusted equity holding are obviously different from those of direct shareholding. As the fund manager involved, Juzhou Company did not disclose the incident of entrusted equity holding.

To sum up, during the fund raising, investment and management stages, Juzhou Company seriously violated regulatory regulations and the responsibilities of managers. Juzhou Company should be liable for compensation for Wang Moumou’s losses. The court finally ruled that Juzhou Company should compensate Wang Moumou for all fund investment funds, subscription fees and capital occupation losses.

Investors subscribe to private equity funds online through the APP and confirm the fund contract and other related documents by clicking to confirm. The legal effect is equivalent to the investor's handwritten signature.

Disputes between Cheng Moumou and Shanghai Dace Asset Management Co., Ltd. and other financial entrusted financial management contracts

[(2023) Shanghai 74 Min Zhong No. 1333]

In the absence of other provisions in the partnership agreement, the scope of the partners' exercise of the right to know shall be determined in accordance with legal provisions as accounting books and other financial information, and the partners shall not have the right to request copies of the materials. For information that does not have a clear time and subject of issuance, and there is no evidence to show that it actually exists, nor does it fall within the scope of financial information, the court will not support the partner's claim to exercise the right to know about this part of the material.

Dispute over the withdrawal of partnership between Tian and Chen

[(2023) Beijing 03 Minzhong No. 7656]

The "Partnership Law" grants limited partners the right to know the scope of corporate financial accounting reports and access to corporate financial accounting books and other financial information. Without special agreement, the scope of limited partners' right to know the investment target of a partnership cannot be expanded to the partnership. More specific information beyond the information disclosed on the official website of the Asset Management Association; the limited partner's right to know should not be exercised personally, and whether the limited partner himself has the professional level or ability does not affect the entrustment of others to exercise his right to know. right

Chen Moumou and Ningbo Kefa Haiding Venture Capital Partnership (Limited Partnership) Partnership Dispute

【(2023) Zhejiang 02 Minzhong No. 2177】

The court of second instance held that the scope of the "Partnership Law" granting limited partners the right to know includes corporate financial accounting reports and access to corporate financial accounting books and other financial information; Haiding Fund has already provided information about invested companies on the official website of the Securities Investment Fund Association of China. The investment situation (including but not limited to basic information of the company, industry, investment time, investment amount, exit time, exit situation, etc.) has been disclosed. Therefore, without special agreement, the scope of the limited partners' right to know in this case cannot be extended to other more specific or confidential information about the investment target other than the above-mentioned information. The aforementioned request by Chen Moumou to disclose information related to the investment target is difficult to support.

Regarding whether Haiding Fund has disclosed relevant materials for product registration with the Asset Management Association of China, on September 2, 2021, Haiding Fund Meng Qingling sent a reply to Chen Moumou in the "20210901 Reply to Chen Moumou". Chen Moumou can obtain relevant information on his own regarding the channels and methods for product registration materials of the Asset Management Association of China. Therefore, Haiding Fund has fulfilled its information disclosure obligations regarding the registration materials.

As for whether the lawyers and accountants entrusted by Chen Moumou can access relevant financial information, it is the basic right of the parties to entrust others to exercise relevant rights on their behalf. Whether they have professional standards will not affect their entrustment rights, unless the right must be exercised by themselves. exercise. Due to its nature, a limited partner’s right to know should not be exercised personally. The Partnership Enterprise Law and the Partnership Agreement do not restrict limited partners from entrusting professionals to exercise their right to know on their behalf. Chen Moumou's entrustment of professionals from professional institutions who have no interest in Haiding Fund, have relevant professional knowledge and have confidentiality obligations to assist in reviewing financial information is in line with the legislative spirit and practical needs of the "Partnership Law" and can protect Chen Moumou's knowledge. The rights are better realized, so the court supports its claim. However, since the object of inspection is financial information including accounting books and accounting vouchers, to realize the right to know, it is sufficient to entrust an accountant, and there is no need to entrust a lawyer. In summary, the court of second instance held that Chen Moumou had the right to entrust accounting personnel to review the financial information that Haiding Fund should disclose. The first-instance rejection of Chen's request to entrust accounting personnel to review financial information was inappropriate, and the second-instance correction was made.

When the repurchase period has not yet expired, the court will not support the equity repurchase claimed by the investor on the grounds that the target company is expected to default (for example, the target company is not operating or is preparing to be cancelled).

Ningbo Kunwei Investment Management Center (Limited Partnership), Beijing Wenlu Technology Co., Ltd. and other company-related disputes

【(2023)Zhejiang 02 Minzhong No. 1340】

Presiding lawyer: Yang Chunbao, first-class lawyer

Phone/WeChat: 1390 182 6830

Business contact and submission email:

chambers.yang@dentons.cn

Address: 9th/24th/25th floor, Shanghai World Financial Center, No. 100 Century Avenue, Shanghai