GUANGZHOU (Fund China) – Contract forms

Private fund can adopt the contract form as public fund. Private fund has investors and the relationship by the holders General Assembly, the private fund management institutions and depositories institutions. Private fund management company contract with fund depositories institutions, Private fund managers initiate private fund to investors and manage investment, depositories institutions keep the asset and chack the account. The propertys of private fund, manage institutions and depositories institutions are independent. China has mature experience in public fund, which has some effects in improving the integrity of management institutions, protecting the safe of money. Now, some private fund management institutions have opened through intrust form, the “shenzhen model”, which the private institutions as investment adviser, charge management fees and specific interests of the trust scheme in the intrust products is close to this contract form.

Company forms

Joint-stock company of sharing investment funds base on co-financing. Investors subscribe the shares, and become the shareholders of fund, major issues and decisions are dicided by the company’s directors. This form is popular in the United States, now some private funds of China have adopted this form. China should legislate to clarify the character, make some specific arrangements in tax.

Limited Partnership

This is the most common form abroad. The organiger as the general partner (GP), and investors as limited partners (LP). In law, GP should bear unlimited liability, and LP bear legal responsibility in the limit of investment. GP also as fund managers, except for collecting management fees, they enjoy a certain proportion of profits base on the bargain. After the law “Partnership Enterprise Law” revise, China has allowed the fund to appear in the form of limited partnership. Private fund achieve the “Shanghai model” through intrust, private institutions as beneficiary in the intrust products, they invest as bottom money in a certain proportion, at the same time, when the income beyond the expect, the beneficiary can eojoy majority income beyond the expect, The limited partnership is close to this form.

Copyright Fund China 2009.

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