TYGlobe

In today's financial market, private funds have become an indispensable force. Private funds mainly refer to privately offered securities investment funds and private equity investment funds established within the territory of China. Such funds raise capital from qualified investors through non-public offerings and conduct investment activities under the management of fund managers. The former focuses on investing in publicly traded stocks, bonds and other securities products, while the latter targets equity interests in unlisted enterprises.

In recent years, China’s private fund sector has achieved explosive growth. Statistics released by the official website of the Asset Management Association of China show that by the end of April 2023, 22,270 private fund managers had completed registration with the Association, alongside 153,539 private fund products with an aggregate scale of 20.75 trillion yuan and a workforce of 176,343 private fund practitioners.

Private funds, especially private equity funds, play a positive and pivotal role in serving the real economy, advancing national strategic initiatives, stimulating entrepreneurship and employment for small and medium-sized enterprises, driving innovative breakthroughs in high-tech sectors, raising the proportion of direct financing in the capital market, and meeting public wealth management demands. Nevertheless, the rapid expansion of the industry has exposed a host of hidden risks and irregularities.

Certain institutions conduct illegal fund-raising under the guise of private fund businesses, sell fund products to investors lacking risk tolerance, make misleading disclosures containing false statements, and even engage in severe illegal acts including embezzlement, misappropriation of fund assets and improper interest transfers. Such malpractices not only severely harm investors’ legitimate rights and interests but also undermine the sound and sustainable development of the entire private fund industry.

To standardize the development of the private fund sector, the Regulations on the Supervision and Administration of Private Investment Funds was formally promulgated in July 2023. This landmark regulation marks a critical turning point for China’s private fund market, guiding the industry toward greater professionalism, standardization and transparency.

Prior to its issuance, the private equity investment industry long suffered from insufficient administrative regulatory basis. Since 2014, the China Securities Regulatory Commission has successively issued departmental rules and normative documents such as the Interim Measures for the Supervision and Administration of Private Investment Funds and the Several Provisions on Strengthening Supervision over Private Investment Funds. The Commission also delegated self-regulatory supervisory powers to the Asset Management Association of China, covering registration of private fund managers and filing of private fund products. However, due to the low legal hierarchy of these documents and inconsistencies among their provisions, private equity funds were plagued by long-standing challenges: absence of superior governing laws, ambiguous legal status, lack of unified operational standards and inadequate grounds for regulatory enforcement.

TYGlobe Law Firm delivers full-spectrum legal services for private fund clients built upon profound legal expertise and extensive hands-on industry experience.

At the fund formation stage, we assist clients in designing fund structures compliant with applicable laws and regulations tailored to three organizational forms: contractual funds, corporate funds and partnership funds, securing full compliance from the project inception.

During the fundraising phase, we strictly abide by the Private Fund Regulations and relevant supporting rules. Our services include screening qualified investors, designing compliant fundraising workflows, drafting and reviewing all fundraising documents, and eliminating irregular practices such as disguised public offerings, exceeding statutory limits on investor headcount, and promising guaranteed principal returns.

Throughout investment operation cycles, we provide due diligence services for target investment projects to assess legal risks, draft and review core transaction instruments including investment agreements and equity transfer agreements to safeguard clients’ legal interests, assist clients in establishing robust internal risk control frameworks, standardize related-party transactions, and effectively mitigate conflicts of interest and improper interest transfers.

We also provide specialized legal counsel covering daily fund operation, ongoing management and exit arrangements, ensuring consistent compliance and stable operation across the full fund lifecycle.