Where the Money Goes

1. What are the latest regulatory developments affecting the private equity market in China?

Despite the relatively light regulation of the private equity (PE) sector compared with that of other capital markets businesses, government authorities and industry associations maintain an appropriate degree of administration. The supervision by the Asset Management Association of China (AMAC) of PE fund managers has always been a key focus.

The most recent development was AMAC's February 5, 2016 issuance of the Announcement on Several Matters Relevant to Further Regulating the Registration of Private Fund Managers (Announcement). Although implementation and record filing of the registration and record filing of private investment fund managers and began in 2014, one of the noteworthy features of the Announcement is that a legal opinion issued by a Chinese law firm is required when submitting an application to register a PE fund manager or notifying changes in certain material particulars of a registered fund manager. This is significant because fund managers that were previously able to secure registration despite having numerous non-compliance issues will face challenges going forward. Fund managers will have to strive for compliance so that lawyers can issue legal opinions that satisfy the requirements. Furthermore, the recommendations that lawyers make in the course of preparing their opinions will help ensure compliance during the establishment of, changes in, and even the operation of, fund managers.