By: Zhang Guofeng
Compiler: http://www.fundcn.org

Present, with the media Private Fund, including the Private Equity Investment Fund, the Private Securities Investment Fund, a large number of reports, More SMEs started to pay attention to the private placement related issues. From my understanding of the situation, Many people (including some of the news media) to the private placement of some of the basic conceptual problem vague understanding In certain extent misunderstood Private issues, but conversely had no benefit in the private placement of China’s development, the need for timely clarification.

1, the legal status of private placement is not clear?

We mentioned before, “Private legal status is not clear” (and the term is also often appears in a variety of media), In fact, here the “Private Placement” only refers to “Private Securities Investment Fund.” Private including two kinds : Private equity investment (PE), First Private investment in securities, The former refers to the non-public placement of equity investments in enterprises, It shares with the “public offering” (eg IPO) relative; The latter refers to the non-publicly raised funds for investment in the secondary securities markets, Private investment funds and securities to investors released to the public, “Public-fund” (as an open-end fund) relative. In our new “partnership” on June 1 before, “Private Securities Investment Fund” because it does not exist, a legal entity, its legal status is not clear. But for Private Securities Investment (PE) in such a way that non-public enterprises to invest in the equity investment is fully consistent law. Wu Xiaoling, vice governor of the central bank have made it very clear that Private equity investment to invest in unlisted shares. use existing civil and companies, securities legal framework, we can control their legal relationship hence their legal status is clear. Objectively speaking, “Private equity investment”, “private”, did give me an illegal or across the borders of the feeling, but in fact, Private equity investment and financing is its only show in the open market for the collection of funds, it is not illegal or legal position is not clear, it is entirely lawful and authorized by the regulatory authorities and support. A few years ago on Private Fund in power speculation news reports, people with a private fund initial understanding, here they do not understand the “private fund” is merely referring to “Private Securities Investment Fund” rather than “Private equity investment fund” , on the difference between these two, we must Private equity investment to usher in a new beginning of development opportunities should be very clear.

2, the private placement does not need approval?

Much of the information stresses “private placement without approval,” and as an important advantage to us. In fact not all the private placement does not need approval. In at least two cases will involve approval first, involving foreign strategic investment or acquisition, Department of Commerce and the need (or) the approval of the SFC; two involve certain special industries, the need to be approved by the industry regulator. If shares of insurance companies, securities companies, although Private equity investment, but also the need for prior respectively Regulatory Commission, the approval of the SFC. In the above two cases, it will involve approval. Private publicity people do not need the approval of misunderstanding, but conversely had no end to the development of private placement.

3, Private Fund not to seek control?

Strictly speaking, there should be “under most circumstances Private Equity Investment Fund will not seek to control”. instead of “Private Fund would seek to control”. Most of Private equity investment as financial investors to invest in the position of the enterprise, its aim is a relatively short period of time so that larger enterprises to enhance value (such as publicly listed), then waiting for the opportunity to withdraw from the process, achieve a greater return on investment, It hoped to rely on the strength of the existing management of enterprises bigger and stronger rather than replace it. However, in individual cases and if not achieve its desired purpose, it does not preclude further measures to gain control. Although such cases less, but in case of enterprises will be greatly affected, As enterprises have invested in the beginning to consider the risk and take measures to avoid, is not always a mistake.

Copyright Fund China 2008.

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