In 2022, Hubei Securities Regulatory Bureau and Shenzhen Securities Regulatory Bureau have issued warning letters to two managers on the promise of guaranteed income. 202 1 Shenzhen Securities Regulatory Bureau, Zhejiang Securities Regulatory Bureau, Anhui Securities Regulatory Bureau, etc. Make an administrative penalty decision on the manager's commitment to capital preservation and income protection. The violation is to stipulate the expected rate of return and the fixed interest payment time in the publicity and promotion materials or fund contracts, and at the same time, I, shareholders or related parties sign the fund share transfer agreement, repurchase agreement and guarantee commitment letter with investors. In the Disciplinary Decision issued by China Foundation on February 27th, 2009+2065438, the manager promised to give investors the minimum return by signing a repurchase agreement with them. In the disciplinary decision issued on February 28, 2020, the manager signed a large number of letters of guarantee, liquidity support letters, share repurchase and other contents in the product promotion documents, promising investors that the investment principal will not be lost and the minimum income will be obtained; The above two managers were disqualified for other violations at the same time.

When it comes to repurchase arrangements, there are two levels of understanding. One is share repurchase at the bottom project level, which is often closely related to project withdrawal; The other level is the repurchase commitment at the level of raising funds, which often goes hand in hand with the prohibition of capital preservation and income/rigid redemption. This paper aims to sort out and discuss the repurchase arrangements of private equity funds. Please correct me if there are any shortcomings.

First, the underlying project level

Share repurchase is a way for the target enterprise and its controlling shareholder/founding shareholder/actual controller, management/employees to buy the equity held by private equity funds at an agreed price, so that private equity funds can withdraw. If the enterprise has good development potential, the management of the enterprise is confident to achieve better management and control of the enterprise by repurchasing shares, and it is an active repurchase to actively request the private equity fund to repurchase shares; If the development direction of the enterprise is inconsistent with the investment appreciation intention of the private equity fund, the manager actively asks the enterprise to buy back the equity, which is a passive repurchase. The following focuses on two situations.

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Private Equity Fund and Target Company

According to the Minutes of the National Court's Civil and Commercial Trial Work Conference issued on 20 19, the Gambling Agreement concluded between the investor and the target company shall be deemed as valid if the reasons for invalidity cannot be determined. However, it should be noted that if the target company is an obligor for share repurchase, the people's court shall conduct a review according to the mandatory provisions of Article 35 of the Company Law of People's Republic of China (PRC) on "Shareholders shall not withdraw their capital contribution" or Article 142 on share repurchase. If the target company has no profit or the profit is not enough to compensate, the private equity institution's claim for cash compensation will be rejected or only partially supported, and the lawsuit will be filed when there is profit in the future; If the target company fails to complete the capital reduction procedure, the claim for private equity repurchase will be rejected.

For the capital reduction procedure of the target company, the limited liability company needs to be resolved by its shareholders' meeting and passed by shareholders representing more than 2/3 of the voting rights; A joint stock limited company shall be decided by the shareholders' meeting, and the voting rights shall be held by the shareholders present at the meeting.