Advantages of contract funds
1, with a wide range of fundraising.
The cumulative number of investors in a single contractual fund is no more than 200, and the investment threshold is 6,543,800 yuan (Securities Investment Fund Law); There are only 50 small private equity funds issued through channels (1 10,000-3 million yuan); Limited partnerships and limited liability companies cannot exceed 50 persons (partnership law and company law). Therefore, the scope of contractual fund raising is wider than the other two forms of fund raising.
2. Professional management and low-cost operation.
The contractual legal relationship does not need to register a special limited partnership or investment company, and does not need to occupy exclusive real estate, movable property and personnel investment.
We only need to stipulate various legal relationships through the fund contract, avoiding the formalities of industrial and commercial registration and change required to set up an enterprise (limited partnership or company system).
In addition, contractual private equity funds usually pay fixed annual management fees to operators and custodians in a similar way. If the annual management fees of operators and custodians exceed this amount, investors will not pay separately.
There is no need to issue through channels, which simplifies the issuance process; Save the channel cost (the current channel cost is about 0.4%, and the previous channel cost is not only higher, but also the guaranteed amount will be set).
3. Wide investment scope
Avoid many investment restrictions, such as channel institutions will set investment restrictions in the investment strategy of private equity funds, limiting the proportion of individual stocks, long and short orders, positions and so on. ; Private equity institutions cannot place orders by themselves, but only authorize channel institutions to place orders in a unified manner.
4. High decision-making efficiency
Under the contract framework, after the investor entrusts the trust property to the management company as the beneficiary, the investor loses the right to control and speak on the property, and the management company is solely responsible for the management and operation of the trust property. Therefore, the decision-making power of contractual funds is generally at the manager level, and the decision-making efficiency is high.
5. Tax advantages
Because contractual private equity funds have no legal personality, they are not regarded as taxpayers. Therefore, in the income distribution link, only the beneficiaries need to declare and pay their own income tax to avoid double taxation. Limited partnership enterprises do not act as taxpayers, but withhold and remit personal income tax (20%); The corporate enterprise itself is a taxpayer (25% corporate income tax), withholding and remitting personal income tax (20%).
In addition, at present, Public Offering of Fund is established by contract, while Public Offering of Fund enjoys more preferential income tax policies.
6. The exit mechanism is flexible and fluid.
One advantage of contractual private equity fund is that its organizational form is flexible and convenient, and the contract between investors and managers can meet different customer groups. Within the legal framework, trust deed is free to conclude various agreements. There can be special clauses in the contract to stipulate the flexible withdrawal mode of investors, because there is no mutual restriction between different clients of the collective trust, and the changes made by some clients will not affect the effectiveness of contractual private equity funds. In addition, it is more likely to allow contractual fund shares to be transferred through trading platforms in the future, which will also improve the liquidity of fund shares. In contrast, corporate funds and limited partnership funds must be withdrawn in strict accordance with relevant legal procedures, and often face complicated industrial and commercial change procedures.
7. High capital security.
Among the three organizational forms, the contractual fund has the highest capital security, and the institutional arrangement of separating the principal, the trustee and the custodian can be set in the contract structure. The trustee may issue instructions on the use of funds, but it must comply with the contract documents, otherwise the trustee has the right to refuse any transfer of funds. On the other hand, the trustee has no right to use the funds without special instructions from the trustee. In addition, supervisors can be set up to supervise and restrict the management and application of private equity funds, which is another important institutional arrangement to ensure the safety of funds. However, there is no custodian as the guarantee link in the system requirements of limited partnership funds, and they rely more on the supervision of supervisors by the board of supervisors or limited partners, so there is a risk that potential managers will abscond with money.