Legal Trends in the Private Equity Fund Industry (May 2025/Issue 87)

2025-06-10 10:55:23 · Yang Chunbao, Sun Zhen, Li Jiaxin

Legal Service Trends of State owned Assets

and Funds Research Center

1. The State owned Assets Supervision and Administration Fund Research Center has released the "Compliance Guidelines for Equity Investment Business of Securities Companies". For details, please click: "Compliance Guidelines for Equity Investment Business of Securities Companies" has been released to promote the healthy development of the industry.

2. Yang Chunbao's legal team assisted Pudong Venture Capital's Leading Zone Industrial Development Fund and Shanghai Guotou in jointly initiating the establishment of the Tailored Intelligent Innovation Fund. For details, please click: Dacheng Shanghai Lawyer Assisted Leading Zone Fund in Launching the Tailored Intelligent Innovation Fund | Dacheng Performance.

3. The arbitration case of a partnership agreement dispute between an investor represented by Yang Chunbao's legal team and a private equity fund manager of a securities firm is pending CIETAC to hold court.

4. Lawyer Yang Chunbao was interviewed by 21st Century Business Herald on topics related to financial asset investment companies (AICs).

5. Lawyer Yang Chunbao went to Dacheng Nanjing office to discuss institutional matters LP Share and exchange on topics related to strict selection of managers and equity repurchases.

6. Lawyer Yang Chunbao was invited to teach "The Myths of Targeted Capital Reduction" to graduate students at the Law School of East China Normal University.

Various announcements and notices of the association

On May 9, 2025, the China Securities Investment Fund Industry Association ("the Association") announced that eight private fund managers, including Beijing Chaoyu Investment Management Co., Ltd., have met the cancellation conditions of one month after the public announcement period and have not actively contacted the Association and completed the situation report. The Association will cancel the registration of the private fund managers of these eight institutions.

On May 9, 2025 and May 23, 2025, the association respectively issued announcements stating that five private fund managers, including Shenzhen Nongyin Private Fund Management Co., Ltd. and Shenzhen Bayang Asset Management Co., Ltd., had abnormal operating conditions and failed to submit a special legal opinion that met the requirements within three months after the written notice was issued. The association will cancel the registration of the private fund managers of these five institutions.

On May 19, 2025, the association issued a notice stating that from May 19, 2025, members of private fund managers can submit their assets through the association's asset management business comprehensive reporting platform（ https://ambers.amac.org.cn ）Please refer to our member's credit information report for the first quarter of 2025 on your own.

Legal, regulatory, and judicial developments

《The People's Bank of China and the China Securities Regulatory Commission jointly issued a notice on supporting the issuance of scientific and technological innovation bonds》

Recently, the People's Bank of China and the China Securities Regulatory Commission jointly issued an announcement on supporting the issuance of scientific and technological innovation bonds (PBOC CSRC Announcement [2025] No. 8, hereinafter referred to as the Announcement). The Announcement proposes several measures to support the issuance of technology innovation bonds, including enriching the product system of technology innovation bonds and improving the supporting mechanism for technology innovation bonds. The Announcement supports private equity investment institutions and venture capital institutions (hereinafter referred to as equity investment institutions) to issue technology innovation bonds (including corporate bonds, corporate bonds, non-financial corporate debt financing tools, etc.), and issuers can flexibly set bond terms to encourage the issuance of long-term bonds, better matching the characteristics and needs of fund use in the field of technology innovation. In addition, the Announcement also stipulates that convenience should be provided for the financing of science and technology innovation bonds in terms of issuance management, information disclosure, credit rating system, and risk diversification and sharing mechanism. Science and technology innovation bonds should be included in the quality and efficiency evaluation of science and technology financial services by financial institutions, and support measures such as interest subsidies and guarantees should be encouraged in places where conditions permit.

The State owned Assets Supervision and Administration Commission (SASAC) has clarified that:

The capital increase agreement of state-owned enterprises strictly prohibits the provision of equity repurchase clauses

On May 8, 2025, the State owned Assets Supervision and Administration Commission of the State Council provided an answer to the issue of equity repurchase agreements in state-owned enterprise capital increase transactions: during the process of enterprise capital increase, the parties to the transaction shall not agree on any content of equity repurchase in the capital increase agreement or in any other way.

《Several policy measures to accelerate the construction of a technology finance system and provide strong support for high-level technological self-reliance and self-improvement》

On May 14, 2025, the Ministry of Science and Technology, the People's Bank of China, the State Administration of Financial Supervision, the China Securities Regulatory Commission, the National Development and Reform Commission, the Ministry of Finance and the State owned Assets Supervision and Administration Commission of the State Council jointly issued Several Policy Measures to Accelerate the Construction of a Science and Technology Financial System to Strongly Support High level Science and Technology Self reliance (hereinafter referred to as "Policy Measures"). The Policy Measures clearly state:

(1) Establish the National Entrepreneurship Investment Guidance Fund. Give full play to the important role of the National Venture Capital Guidance Fund in supporting technological innovation, take promoting the growth of technology-based enterprises as an important direction, cultivate and develop strategic emerging industries, especially future industries, and promote the transformation of major scientific and technological achievements into real productivity;

(2) Expand the sources of investment funds for innovation. Expand the pilot scope of equity investment in financial asset investment companies to 18 provinces where cities are located, and support insurance funds to participate in the pilot of equity investment in financial asset investment companies; Support venture capital institutions and industrial investment institutions to issue bonds for financing, and expand direct financing channels; Encourage the Social Security Foundation to carry out equity fund investments within its own business scope and risk prevention requirements, and support technological innovation; Optimize management mechanisms, support insurance funds to participate in venture capital based on market-oriented principles, and promote pilot reforms for long-term investment of insurance funds; Guide wealth management companies, trust companies, etc. to participate in venture capital in accordance with laws and regulations;

(3) Optimize the assessment and evaluation mechanism for state-owned venture capital. Implement policies and measures to support the high-quality development of central enterprise venture capital funds, and improve policy mechanisms for state-owned capital investment, assessment, fault tolerance, and exit that are in line with the characteristics and development laws of the venture capital industry; Assess state-owned venture capital institutions based on the entire fund lifecycle; Guide state-owned capital to become long-term and patient capital that supports entrepreneurial investment; Drive local state-owned capital and other industries' state-owned capital to follow suit;

(4) Establish sound exit channels for venture capital. Evaluate the effectiveness of pilot private equity fund share transfers in regional equity markets such as Beijing, Shanghai, and Guangdong, and further optimize the share transfer business process and pricing mechanism. Carry out a pilot program for physical distribution of stocks in private equity venture capital funds, allowing the distribution of shares held in listed companies to investors through non trading transfer methods. Encourage the development of private equity secondary market funds (S funds)

Heavy Judgment:

Breaking through the 6-month exercise period limit for equity repurchase on Fada website

In March 2025, the Second Intermediate People's Court of Beijing made a final judgment on a stock repurchase dispute, stating that the repurchase right triggered before the Supreme People's Court's opinion on "the exercise period of the stock repurchase right should not exceed 6 months" was published on the Law Answering Network is not subject to this deadline. In its judgment, Beijing No.2 Intermediate People's Court specifically pointed out that the term "appropriate" in the opinion is an advocacy recommendation on how to determine a reasonable period in general situations, rather than a comprehensive requirement on how to determine a specific reasonable period in individual cases. For legal comments on this judgment, please click on: Heavy Judgment: Breaking through the 6-month repurchase right rule of Fada Network

Industry Trends

New Model of Mergers and Acquisitions Fund:

GP Mergers and acquisitions come first, fund raising comes later

On May 23rd, Tianmai Technology (SZ: 300807) announced that its controlling shareholder and Yizhi Action Person have signed a supplementary agreement on share transfer and the actual controller is expected to change. According to the supplementary agreement, the acquirer of 26.10% equity of Tianmai Technology has been changed from Suzhou Qihan to Suzhou Qichen (i.e. Qiming Fund), and from Suzhou Qihan to Qiming Fund managed by Suzhou Qihan, with the transaction price remaining unchanged.

If the supplementary agreement can ultimately obtain compliance review confirmation from the Shenzhen Stock Exchange, it may open up a new operating model for the majority of M&A funds, that is, adopting a "invest first, raise later" approach, where the proposed fund manager first acquires the listed company and then proceeds with fund raising. This model is a win-win situation for fund managers and investors: for managers, firstly, special funds are easier to raise compared to blind pool funds. Secondly, changing the acquirer from a manager to a fund does not increase the transaction price, which allows managers to choose trading opportunities and determine acquisition costs. Thirdly, locking in acquisition costs will also enhance fundraising capabilities; For fund investors, firstly, the manager acquires the listed company first, which requires a high level of financial strength from the manager, increasing the safety factor of fund investors. Secondly, the manager locks in the acquisition cost in advance, which means that the return of fund investors has a greater degree of certainty.

Author

Lawyer Yang Chunbao

First level lawyer

(Senior Professional Title)

Mobile phone:

13901826830

Email:

chambers.yang@dentons.cn

Senior Partner of Dacheng (Shanghai) Law Firm, Director of Capital Market Department, Director of State owned Fund Research Center, Professional Leader of Private Equity and Investment Funds in Dacheng China, and Member of Shanghai Foreign Legal Talent Pool. Bachelor of Law from Fudan University (1992), Master of Law from the University of Science and Technology Sydney (2001), and Master of Law from East China University of Political Science and Law (2001).

Lawyer Yang has been practicing for 30 years, providing long-term legal services in private equity funds, investment and financing, mergers and acquisitions, and restructuring, covering major finance, health, real estate, and infrastructure TMT、 Exhibition industry, manufacturing industry and other industries. Selected multiple times since 2004 The Legal 500“ The rankings of "Private Equity Funds" and "Companies and Businesses" have been reviewed multiple times Asia Law Profiles Specially recommended or reviewed, continuously selected for internationally renowned legal media since 2016 China Business Law Journal“100 Outstanding Lawyer in Chinese Business ", awarded Leaders in Law - 2021 Global Awards“ The title of "China Annual Company Law Expert"; Continuously listed on the recommended list of "Excellent Lawyers&Law Firms Recommended by China's Famous Enterprise Law Council". Having the qualifications to serve as an independent director of a listed company, I am a part-time professor at the School of Law of East China University of Science and Technology, a practical supervisor at the School of Law of Fudan University, a part-time graduate supervisor at East China University of Political Science and Law, a lecturer at the Private Equity CEO Class of Shanghai Jiao Tong University, and a lecturer at the Cross border Business Talent Training Class of Shanghai Municipal Commission of Commerce. Published 16 monographs including "Practical Operation of Risk Prevention and Control in Private Equity Investment Funds", "Practical Operation and Case Analysis of Legal Risk Prevention and Control in the Whole Process of Enterprises", and "Wansheng Capital 2: Complete Operation Guide for Company Investment and Financing Model Process". Lawyer Yang's practice areas include companies, investment mergers and acquisitions, private equity funds, and capital markets, TMT， Real estate and construction engineering, as well as dispute resolution in the aforementioned fields.

Lawyer SunZhen

Partner of Dacheng (Shanghai) Law Firm

Email:

sun.zhen@dentons.cn

Prior to practicing law, Lawyer Sun served as a President or Vice President Executive Assistant in Fortune 500 companies such as Watts, Ingersoll Rand, and Alcatel Lucent in the United States, accumulating rich experience in enterprise operations management and possessing excellent bilingual communication and coordination skills in both Chinese and English. Lawyer Sun has published "Practical Operation of Risk Prevention and Control in Private Equity Investment Funds" and has published dozens of articles in the fields of mergers and acquisitions, funds, and e-commerce. Lawyer Sun specializes in private equity investment, corporate mergers and acquisitions, e-commerce, and labor legal affairs.

Lawyer Li Jiaxin

Lawyer from Dacheng (Shanghai) Law Firm

Lawyer Li graduated from the Law School of Fudan University and specializes in private equity funds, investment and financing mergers and acquisitions, and corporate legal services. He has provided legal due diligence, transaction document review, and other legal services for multiple parent funds in selecting fund managers and investment fund projects, as well as fund investment target company projects. He has also provided legal services related to fund fundraising, investment management, and risk control for multiple private equity fund managers.

Fund

law

Private Equity

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