1. Typical internal governance structure of foreign private equity funds
Among them, the partners' meeting generally only makes decisions related to the admission of new partners, the withdrawal of partners, the modification of limited partnership agreement and the liquidation of partnership enterprises. And listen to the general partner's report on the implementation of partnership affairs and supervise the general partner to implement partnership affairs according to the requirements of the partnership agreement, but the partner meeting does not control the investment decision of the partnership enterprise and the operation of the invested project. Different partners have the same voting rights in the partnership, and the matters decided by the partners' meeting shall be voted according to the number of people, regardless of the proportion of capital contribution.
Some foreign private equity funds also set up advisory committees, which are generally composed of limited partners who have subscribed a certain proportion of capital, to make decisions on investment matters with conflicts of interest, such as related transactions between partnership enterprises and general partners, investment projects with foreign investment exceeding a limited proportion, etc., but they cannot replace and exceed the authority of general partners.
The general partner is the actual operator of the fund and the decision-maker and executor of the fund investment. Within the scope authorized by the partnership agreement, the investment decision of the fund is completely completed by the general partner without interference and influence from other limited partners. To sum up, the original intention of limited partnership private equity fund is "capable people contribute, rich people pay the bill".
2. Compromise of internal governance structure of domestic private equity funds.
Because the concept of domestic debt investment has not been widely recognized by the society, mature investors need to be gradually cultivated, and there is also a lack of general partners with high credibility and appeal; Therefore, the general partners of domestic private equity funds often transfer part of the decision-making power and management power to the limited partners, which reflects the compromise of domestic private equity funds under the domestic objective reality.
The biggest feature of this internal governance structure is the establishment of an investment decision-making Committee composed of general partners, limited partners and third-party professionals, which has the final decision on the investment matters of the fund. For example, the Jiafucheng Fund in China stipulates in the partnership agreement that the investment and decision-making committee consists of seven members, two of whom are appointed by the general partner, three representatives of the limited partner and two external experts, with financial and legal backgrounds. In addition, Sequoia Fund, a well-known domestic private equity fund, also adopts this form of governance.
3. Limited partnership and corporate private equity funds.
Although this private equity fund is established in the form of limited partnership, the investment operation of the fund is decided by all partners. Generally speaking, the fund's partners' meeting or investment committee votes according to the proportion of capital contribution, which is similar to the decision-making form of the company's shareholders' meeting. Wenzhou Donghai Venture Capital, the first limited partnership private equity fund in the Yangtze River Delta, adopted this form. However, due to the inconsistent investment intentions of investors, it is difficult to reach an agreement on investment matters, which eventually led to the early death of Donghai Venture Capital.