On 3 July 2023, China’s State Council issued the “Regulation on the Supervision and Administration of Private Investment Funds” (hereinafter the “Regulation”, 私募投资基金监督管理条例).
The Regulation applies to private investment fund transactions in China that (i) raise funds in a non-public manner, (ii) establish investment funds or set up companies or partnerships in accordance with the law to engage in investment activities, (iii) are managed by private fund managers or general partners; and (iv) conduct investment transactions for the benefit of investors.
The Regulation consists of seven chapters and 62 articles, covering various aspects of supervision and administration of private investment fund business activities, including the scope of application, duties of managers and custodians, fundraising and investment operations, special provisions for venture capital funds, supervision and administration, and legal liabilities.
The highlights of the Regulation are as follows.
- A private fund manager shall raise funds on its own and may not have others raise funds on its behalf.
- The cumulative number of investors in a single private fund may not exceed the specific number as prescribed by law. No private fund manager may exceed the limit on the number of investors as prescribed by law by establishing multiple private funds for a single financing project or otherwise, or lower the criteria for qualified investors by splitting or transferring private fund shares or the right to income or otherwise.
- The regulatory authority shall conduct supervision and administration by distinguishing venture capital funds from other private funds, including simplified registration and filing formalities and reduced supervisory measures.
Photo by Zhengnan Liu on Unsplash
Contributors: CJO Staff Contributors Team
