Private Equity Funds Out Of The Legal System

With a short history of 20 years, Private equity fund (PE) is quite new here in China. However, PE has been an important strength to lead the development of Chinese capital market. During the whole process of PE, the exit of capitals is quite essential. Normally, the country with developed PE industry has smoothly exit to improve the development of this industry. Because of the close relationship between the exit and the whole PE industry, it's very important to solve the legal problems during the exit process. At present, the legal regulations in China are far away from perfect, which legally hinders the exit of PE. Therefore, it's a major issue of the PE system to adjust the original regulations on the basis of local conditions on the purpose of a smooth mechanism of exit.The paper probes into this issue from four aspects:The first chapter points out the concept and the feature of Private equity funds, and then compares the two concepts of PE and VC which are easily confused. After describing the definition and the importance of exit of PE, this paper introduces four forms of exit:IPO, M&A, Shares Buy-back and bankruptcy liquidation and then analyses the merits and defects of each form.The second chapter introduces the extra-territorial private equity fund. The most representative of the United States and Germany from the comparative analysis of the system summed up the lessons which we can learn.The third chapter introduces the current situation of exit of PE in China, and then analyses the legal obstacles in each form of exitThe fourth chapter envisages an improved legal system for the exit of PE in China and emphasizes on building the multi-level capital market.