Legal Risk Prevention report on private fund disputes in 2021 From Shanghai financial court

The following is the Legal Risk Prevention report on private fund disputes in 2021 From Shanghai financial court recommended by recordtrend.com. And this article belongs to the classification: Investment & Economy, research report.

The report released this time focuses on private fund disputes. In recent years, the private equity fund industry has developed rapidly and played a positive role in increasing the proportion of direct financing, promoting scientific and technological innovation, optimizing the investor structure of the capital market, serving the real economy and enriching the forms of residents’ wealth management; However, at the same time, there are also violations such as evading the requirements of qualified investors, disguised capital pool operation and rigid cashing. The industry risks are gradually emerging. It is necessary to sort out and analyze the legal risks of the industry in order to promote the healthy development of the industry.

The report combs and analyzes the legal risks of the private placement fund industry from five aspects: the litigation situation of the private placement fund, the risk management of the industry, the types of disputes and risk disclosure, the suggestions on legal risk prevention, and the suggestions on the improvement of the key points of the contract terms.

According to the report on private placement, the number of cases involving private placement funds increased rapidly between 2021 and 2018, and the number of cases involving private placement funds increased rapidly between 2021 and 2018; Second, disputes mainly occur within private equity funds, and 67.53% of disputes occur among investors, managers, custodians, investment consultants and sales institutions; Third, the causes of action are diverse, but mainly contract disputes, accounting for 71.96%; Fourth, there are various types of petitions, but mainly advocating the liability for breach of contract, accounting for 67.34%; Fifth, most of the disputes are brought by individual investors against the manager, 68.08% of the litigation cases are brought by investors, of which 92.95% are individual investors; Sixth, private equity funds are organized in various forms, mainly in partnership and contract; Seventh, the investment targets are mainly non standardized assets, and most of the investment targets are equity, accounting for 41.11%; Eighth, disputes often occur in the investment and exit stages, accounting for 34.50% and 61.25% respectively; Ninth, the principal return commitment is relatively common and diverse, accounting for 28.41%; 10. The number of litigation cases is far less than that of arbitration cases; 11. The implementation rate of successful cases is low due to the poor credit of the person subjected to execution. 62.57% of the cases have no property to implement, only 14.62% of the cases are fully implemented, and the actual implementation rate is 13.60%.

In order to deeply mine the comprehensive data of litigation and market and comprehensively judge the problems existing in the risk management of private equity fund industry, the Shanghai financial court issued a questionnaire to domestic private equity fund member units. The report makes an in-depth analysis of 519 effective questionnaires fed back and summarizes the problems existing in the current risk management of private equity fund industry, mainly including: the majority of small-scale managers; The manager has fewer compliance personnel; The investment object of private equity fund is relatively single; The nature of fund legal relationship is controversial; Nearly one third of private fund managers have not implemented the telephone return visit system in the cooling off period; About one fifth of the fund contracts do not fully stipulate the duty of diligence of the manager; The contract agreement on fund liquidation is not clear enough; The shareholders’ meeting did not give full play to its role, etc.

The report combs the specific situations of disputes involved in the raising, investment, management and withdrawal stages of private equity funds, and analyzes the deep-seated causes of disputes involving the appropriateness of investors, the commitment of principal return, the violation of the obligations of managers and custodians in the investment management stage, withdrawal and liquidation one by one from the perspective of law and finance, and reveals the risks.

The report puts forward opinions and suggestions to investors, regulatory authorities and market institutions according to different subjects.

For investors, suggestions: truthfully and objectively provide investors with appropriate information; Rationally treat the principal return commitment, carefully select the manager and private placement products, and bear the commercial risks by themselves; Pay attention to the contractual provisions on the withdrawal and liquidation of private equity funds.

Suggestions on the perfection of investor’s obligations; Improve the regulatory norms on principal return commitment; Clarify and refine the obligations and standards of managers; Build industry standards based on market best practices; Clarify the nature of the custodian’s obligations and standards of conduct; Strengthen the normative guidance for the withdrawal of private equity funds.

For managers, sales agencies and custodians, it is suggested that managers and sales agencies should further standardize the performance of appropriateness obligations; We should establish market reputation by improving service level and business capacity, and avoid providing principal return commitment as a means to attract investors; Select the appropriate legal relationship and organizational form of private placement fund; The manager shall fully perform the obligation of loyalty and diligence; Clearly stipulate the custody responsibilities and draw a clear line between the rights and obligations of the custodian; Refine the rights, obligations and operation procedures of all parties in the liquidation process of private equity fund withdrawal at maturity.

Finally, in order to further clarify and refine the situations prone to disputes, effectively plug the risk loopholes and strengthen the governance of the source of disputes, the report puts forward ten suggestions on improving the contract terms of private equity funds: first, clarify the nature of the legal relationship of private equity funds; Second, prompt the situation and legal consequences of constituting rigid exchange; Third, disclose whether to provide other credit enhancement measures and specific methods; Fourth, clarify the nature and content of the manager’s obligations; Fifth, clarify the legal status and obligations of the custodian; Sixth, clarify the changes, dissolution and termination of the fund contract and its legal consequences; Seventh, clarify the conditions, specific methods and procedures for investors to withdraw; VIII. Special precautions for investors of partnership private equity funds to exit; Ninth, clarify the conditions, duration and methods of private placement fund liquidation; Tenth, clarify the liability for breach of contract when the manager is lazy in liquidation.

Xiao Kai, vice president of the Shanghai court of justice, said that he would further promote the release of the annual financial risk prevention and normalization report, and provide a stronger guarantee for the continuous development of the Shanghai court of justice and the normalization of financial risks.

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