"China's old partnership enterprise law does not recognize the limited partnership system, and all partners have to bear unlimited joint and several liability." Jia Mingjun, the managing partner of Shanghai Hu Jia Law Firm, told the reporter of China Business News that in this case, investors are very cautious about investing, and the revised Partnership Law introduced the limited partnership system.
A limited partnership consists of several limited partners (LP) and several general partners (GP). The general partner shall be jointly and severally liable for the debts of the partnership, and the limited partner shall be liable for the debts of the partnership to the extent of the capital contribution subscribed.
"The establishment of limited partnership is mainly to stimulate economic development, and it also provides an opportunity to boost limited partnership private equity funds." Jia Mingjun said that investors can invest as limited partners and assume limited responsibilities, while fund managers can become general partners and assume unlimited responsibilities with a small amount of funds.
At the same time, the general partner is responsible for the operation and management of the company, and the limited partner may not contribute to the partnership with labor services; A limited partner shall not represent the limited partnership enterprise externally without performing partnership affairs.
In the structure of limited partnership PE fund, private equity investment company acts as general partner, while the fund as a whole exists as a limited partnership. The fund mainly raises funds from limited partners, and the general partners make all investment decisions. During its life cycle, a fund usually makes 15 to 25 different investments, and the amount of each investment generally does not exceed 10% of the total fund.
The main source of general partner's remuneration is fund management fee, including performance commission. Generally speaking, the general partner can get 2%~4% of the total fund management commission and 20% of the fund profit every year.