Viewpoint... Interpretation of common practical problems in the compliance operation of private equity managers.
Published:
2024-06-28
In recent years, due to the continuous lightning of private placement and the stricter supervision of the China-based Association, the compliance operation of private placement managers after their establishment is extremely important. However, in the operation process of many private placement institutions, compliance operation is actually extremely complicated and difficult. Now, in combination with some blind spots and hot issues related to private placement compliance operation in the daily legal practice provided by us in the operation process of private placement managers, we will briefly sort them out and interpret them in stages.
In recent years, due to the continuous lightning of private placement and the stricter supervision of the China-based Association, the compliance operation of private placement managers after their establishment is extremely important. However, in the operation process of many private placement institutions, compliance operation is actually extremely complicated and difficult. Now, in combination with some blind spots and hot issues related to private placement compliance operation in the daily legal practice provided by us in the operation process of private placement managers, we will briefly sort them out and interpret them in stages.
Q1: What circumstances require the private equity manager to make up the 10 million paid-in capital?
There have been private equity institutions asked: if we pay-in did not reach the 10 million, is the private equity fund products are to be wound up? Others have asked, we are going to file a new fund products, that the association requires the manager to pay-in to meet the 10 million? Recently we have to do the fund manager change, change the manager's registered address, will trigger the need for managers to meet the requirements of paid-in 10 million?
None of these issues trigger the administrator's need to meet the requirements of the paid-in 10 million capital contribution, and there is no need to make up the 10 million paid-in capital contribution.
Now let's explain what situations require private equity fund managers to make up the paid-in capital of the 10 million. At present, the Association clearly requires managers to make up the paid-in capital of the 10 million. There are two situations: one is the change of the actual controller; The second is that the paid-in capital of the manager has changed. By extension, should the change of minority shareholders meet the paid-in capital of the 10 million?
According to the association in the official question and answer, it is clear that the private equity fund manager changes minority shareholders, involving changes in capital such as paid-in capital, should meet the private equity fund manager's paid-in monetary capital is not less than the 10 million requirements. This means that there are two conditions for the change of minority shareholders to trigger the administrator to meet the paid-up 10 million requirement, one is to change the minority shareholders, and the other is to involve the change of paid-up capital.
However, in the actual audit of the association also appeared only change small shareholders do not involve the change of paid-in capital is also feedback, which shows that the association's audit scale is more stringent, it is recommended that managers in the change of small shareholders submitted to the association audit should also pay attention to the need to make up the risk of 10 million paid-in.
Q2: What are the circumstances in which the fund is submitted for liquidation or is in the process of liquidation that do not require an audit report?
First of all, before December 31, 2023, private equity funds that have submitted "liquidation end" applications and uploaded liquidation reports in AMBERS system do not need to do audit reports again. In the system, it can be seen that the "audit information" column in the financial monitoring report section is changed to "optional items", indicating that there is no need to upload audit reports.
Secondly, private equity funds established after October 1, 2023 can also not do audit reports.
Therefore, private equity funds that submit liquidation or are in liquidation must submit audit reports as long as the liquidation has not been completed before December 31, 2023, unless the private equity fund was established after October 1, 2023.
Third, private equity funds, venture capital funds, whether contractual, partnership or corporate, whether direct investment or FOF private equity fund managers are required to submit audit reports. The audit report of a private equity manager with a management scale of more than 0.5 billion shall be issued by an accounting firm filed by the CSRC.
Q3: Will the private equity manager be penalized by the China Foundation Association or local regulators for packaging and mailing all materials to investors for signature?
A private equity institution once asked: the investors of a private equity fund they manage complained to the China Foundation Association that the private equity manager packaged and mailed the fund contract, risk questionnaire, commitment letter and other materials to the investors. there was a punishment for signing contracts in different places without going through the procedures for determining specific objects to illegally promote private equity funds, and the China Foundation Association issued a warning letter.
The above consultation situation is indeed easy to be identified by the association as not in line with the order of the collection process, from the compliance regulatory level there are certain flaws, vulnerable to the risk of the corresponding regulatory penalties.
However, there is a difference at the judicial level. In May 2023, the Shanghai Financial Court had a case in which a similar investor paid first and then signed a contract by default and then signed the information and confirmed the risk assessment. The court found that the private equity institution did not substantially violate the obligation of appropriateness.
It can be seen that there are some differences in the regulatory scale at the level of compliance supervision and judicial precedent, which need to be analyzed on a case-by-case.
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