Eight structural designs of private equity funds. They are company system, trust system, limited partnership, company+limited partnership, company+trust, parent fund FOF, trust+limited partnership, company+trust+limited partnership, etc.
The above eight architectures are all designed based on three basic organizational forms of PE:
1, company system
The investor of the company fund participates in the fund investment as a shareholder, enjoys the shareholder rights stipulated in the Company Law according to law, and assumes limited liability for the company's debts to the extent of its capital contribution. Fund managers can exist in two forms: one is to directly participate in the investment management of the company as a permanent director of the company; The other is as an external management company to accept funds entrusted for investment management.
The characteristics of the fund: need to pay enterprise income tax; Shares can be listed; Investment income can be retained to continue investment; Investors other than corporate income tax need to pay personal income tax, which involves double taxation.
2. Limited partnership
Partnership funds rarely take the form of general partnership, but generally take the form of limited partnership. Investors of a limited partnership fund participate in the investment as partners and enjoy the property rights of the partnership enterprise according to law. Among them, the general partner exercises civil rights on behalf of the fund and assumes unlimited joint liability for the debts of the fund.
Other investors, as limited partners, shall be jointly and severally liable for the fund debts to the extent of their subscribed capital contributions. From the international industry practice, fund managers generally do not serve as general partners, but accept the entrustment of general partners to manage fund investment, but generally it is related. At present, the domestic practice is generally that fund managers serve as general partners.
Features of limited partnership system: General partner (GP) and limited partner (LP)*** form a limited partnership, in which private equity investment company, as GP, initiates the establishment of a limited partnership, and subscribes a small part of the capital contribution, while LP subscribes most of the capital contribution. GP assumes unlimited liability, is responsible for the investment, operation and management of the fund, and draws a certain percentage from the total fund amount as the fund management fee every year; LP assumes limited liability, does not participate in company management, shares partnership income, and enjoys the right to know and consult.
3. Trust system
The trust system fund is established by the fund holder as the principal and beneficiary, and the fund manager acts as the trustee according to the fund trust contract, exercises the fund property rights in his own name for the benefit of the fund holder, and assumes the corresponding trustee responsibilities.
The characteristics of trust system: similar to limited partnership, it also has tax-free status; However, the funds need to be put in place in one step, and the use efficiency is low; It involves trust intermediary, which increases the operating cost of the fund.