New policies and PE fund managers of ‘other categories’

The Legislative Affairs Office of the State Council promulgated on 30 August 2017 the Interim Regulations (Draft for Soliciting Opinions) on the Administration of Private Equity Investment Funds (the exposure draft) to make further provisions with respect to the managers, custodians, capital raising, operation, information disclosure, self-regulation, supervision and management of “private equity securities investment funds and private equity investment funds”. The exposure draft also has a chapter dedicated to venture capital funds. The draft, however, does not make any mention of “managers of private equity funds of other categories”. So under the new policy, what should managers of private equity funds of other categories do?

Creation of private equity funds of other categories. Private equity funds of other categories were created on 21 August 2014. Article 2 of the Interim Measures for the Supervision and Administration of Private Equity Investment Funds stipulates that “investments that may be made with the assets of private equity funds include stocks, equities, bonds, futures, options, fund units and other investments agreed upon in investment contracts”. Article 20 stipulates that, “For the formation of private equity funds of other categories, the rights and obligations of the parties and other relevant matters shall be expressly stipulated in the fund contract in the light of the provisions of Article 93 and Article 94 of the Securities Investment Fund Law.”

In 2014, the private equity fund registration system (commonly known as the “old system”) of the Asset Management Association of China (AMAC) added private equity investment funds of other categories, but the old system was confusing in terms of the classification of investments.

Author: Jiang Fengtao is the founding partner and Zhang Jinjin is a capital market associate at Hengdu Law Firm