On the basis of trust relationship and fiduciary responsibility, a "safety net" to protect investors' interests has been built, which has laid the cornerstone for the healthy development of the fund industry, defined the independent position of industry self-discipline and constructed a modern industry governance pattern. 1. What are the legal risks of private equity funds? 1. Legal Risks of Exit from Listing The first step in backdoor listing is to choose a good "shell". Listed companies willing to sell "shells" are usually cornered in operation and governance, and major shareholders will be willing to sell "shells". In order to make the shell sell at a better price, the seller may often hide some hidden debts, which requires the buyer to hire professional teams in various fields to conduct due diligence on the shell company, find out the creditor-debtor relationship of the shell company, and avoid legal risks. Article 45 of the Measures for the Administration of Major Asset Restructuring of Listed Companies stipulates that if a specific object obtains the actual control right of the listed company by subscribing for the issued shares, it shall not transfer the shares of the listed company obtained by subscribing for the assets within 36 months. This shows that private equity funds only quit through backdoor listing at least three years after successful backdoor listing. Whether you can successfully withdraw depends on the integrated operation of the enterprise after the successful backdoor and the performance of the stock price in the secondary market. 2. Legal Risk of Withdrawal from Equity Transfer In practice, in order to withdraw more efficiently and make profits, private equity funds usually agree with the company in the investment agreement that private equity funds can withdraw at any time to maximize their own interests. For limited companies, according to Article 7 1 of the Company Law, private equity funds can stipulate the free transfer of equity in the investment agreement. As long as the agreement is included in the articles of association, the clause will be effective and the private equity fund can withdraw smoothly. It should be noted that if a company wants to buy back the equity of a private equity fund, it must meet the three conditions stipulated in Article 75 of the Company Law, and other acquisition reasons cannot be stipulated in the company's articles of association. For joint-stock companies, private equity funds cannot reach an agreement with the company to withdraw at any time. If there is an agreement, it must be outside the one-year lock-up period in Article 142 of the Company Law. However, in the gambling agreement between private equity funds and enterprise management, there is often no clear time agreement on the time of equity repurchase. If the agreed share repurchase occurs within the lock-up period, the share transfer will not take effect, but this does not mean that the repurchase clause is invalid. After the lock-up period ends, the re-occurrence of equity transfer shall be deemed as valid. 3. Legal Risk of Liquidation Exit If the investment project of private equity investment fund fails, liquidation is the only exit method, and early liquidation can make private equity fund recover more investment principal. Among them, the enterprise bankruptcy law is applicable to bankruptcy liquidation, while the Chinese-foreign joint venture law, the Chinese-foreign cooperative venture law, the foreign-capital enterprise law and the civil procedure law are applicable to non-bankruptcy liquidation according to the nature of the enterprise. Due to the high-risk characteristics of private equity investment, private equity funds often agree with the invested enterprises on the priority of liquidation, that is, when the invested enterprises are liquidated, they can get the liquidation value of the enterprises first and ensure that they can recover their initial investment to the maximum extent. However, the Company Law has no legal basis for this. Article 187 of the Company Law stipulates the order of liquidation and repayment of company property, and creditors of specific property can also exercise the right of exemption. Only the Regulations for the Implementation of the Law on Chinese-foreign Joint Ventures and Article 94 of the Law on Chinese-foreign Joint Ventures allow exceptions to be made in the agreements, contracts and articles of association of joint ventures. In addition, there are many legal risks in bankruptcy liquidation procedures, including creditor's rights and debts missed due to false asset declaration and review. Second, the characteristics of private equity funds 1, the return on equity investment is very rich. Unlike creditor's rights investment, which earns a certain percentage of interest income from invested capital, equity investment obtains dividends from the company's income according to the proportion of capital contribution. Once the invested company is successfully listed, the profit of private equity investment fund may be several times or dozens of times. 2. Equity investment is accompanied by high risks. Equity investment usually needs to go through several years of investment cycle, and because it is invested in developing or growing enterprises, the development risk of the invested enterprises themselves is very high. If the invested enterprise ends in bankruptcy, the private equity fund may lose all its money. 3. Equity investment can provide all-round value-added services. Private equity investment not only injects capital into the target enterprise, but also injects advanced management experience and various value-added services, which is also a key factor to attract enterprises. While meeting the financing needs of enterprises, private equity investment funds can help enterprises improve their management ability, expand procurement or sales channels, integrate the relationship between enterprises and local governments, and coordinate the relationship between enterprises and other enterprises in the industry. All-round value-added services are the highlight and competitiveness of private equity investment funds. The operation mode of private equity fund is equity investment, that is, the shares of unlisted companies are obtained through capital increase and share expansion or share transfer, and profits are made through share value-added transfer.

Legal objectivity:

Article 9 of the Securities Law of People's Republic of China (PRC) * * * The public offering of securities must meet the conditions stipulated by laws and administrative regulations, and shall be reported to the securities regulatory agency of the State Council or the department authorized by the State Council for registration according to law. Without legal registration, no unit or individual may publicly issue securities. The specific scope and implementation steps of the securities issuance registration system shall be stipulated by the State Council. In any of the following circumstances, it is a public offering: (1) issuing securities to unspecified objects; (2) More than 200 people have issued securities to specific objects, but the number of employees who have implemented the employee stock ownership plan according to law is not included; (3) Other issuance acts as stipulated by laws and administrative regulations. Non-public issuance of securities shall not be carried out by advertising, public persuasion or disguised publicity.