On March 31, at the invitation of Legal Culture Law Firm, Ming Zhong, partner of East & Concord Partners Shenzhen Office, gave a special lecture “On the legal practice in the operational mode of buyout fund” to over a hundred financial institution and enterprise representatives in Shenzhen.
At the forum, Ming Zhong introduced in detail five parts, namely “What Is Buyout Fund,” “Operational Mode of Buyout Fund,” “Details of the ‘PE + listed company’ Mode,” “Analysis of the Legal Risks of ‘PE + listed company’ Buyout Fund” and “Design of Terms and Conditions on ‘PE + listed company’ Buyout Fund.”
Regarding “What Is Buyout Fund,” Ming Zhong introduced its basic concept and the characteristics of buyout fund.
In the “Operational Mode of Buyout Fund” part, Ming Zhong generally introduced six major types of funds, namely traditional buyout funds, PMA, embedded buyout funds, overseas buyout funds, malicious acquisitions buyout funds and “PE + listed company buyout funds,” and pointed out that establishing a buyout fund will play an active role in promoting listed company’ enterprise value evaluation, leverage acquisitions, and avoidance of M&A risks with investment agencies’ professional experience.
In the part of “Details of the ‘PE + listed company’ Mode,” Ming Zhong introduced the basic structure and four basic characteristics of such mode, pointed out the advantages and disadvantages under “five investment modes” with corresponding cases. She gave priority to introducing “the Heaven-Sent Capital Management Group Co., Ltd.+ Dakang Food & Agriculture M&A fund case,” dissembled the case into the establishment of the fund, the investment management by the “decision-making committee,” the signing of “escrow agreement,” and withdrawal while analyzing in detail the “’PE + listed company’ mode.”
Lastly, in the parts of ”Analysis of the Legal Risks of ‘PE + listed company’ Buyout Fund” and “Design of Terms and Conditions on ‘PE + listed company’ Buyout Fund,” Ming Zhong pointed out that some cooperation aiming at driving up the stock prices would present the risk of greater uncertainty to long-term reorganization; that private equity agencies bought shares of listed companies to participate in in-depth cooperation would negatively encourage stock price speculation while easily causing insider trading or tunneling; and that when private equity agencies and listed companies had different pursuits of interests, buyout fund would easily become “zombie fund.”
About the above risks, it was suggested to follow the marketization and equality rules in accordance with the Securities Law, Law on Partnerships, Company Law at the establishment stage to make timely announcement of the acquisition funds; pay attention to legal risks, credit risks and information risks at the offering stage; ensure thorough due diligence and more reasonable trading structure and mode in combination with the investment proposal and project implementation plan at the investment stage; keep improving the post-investment management system and operational procedure, strengthen in-process control, implement on-site monitoring of the invested enterprises, trace capital use in a timely way, report financial information and market situation at the management stage; and at withdrawal, overall arrangements shall be made over the project, design a reasonable trading structure and terms and conditions, calculate profits as contracted, make overall taxation planning, and protect the investors’ rights and interests.
The lecture hall was full and Ming Zhong shared useful knowledge with the attendees. After the lecture, the attendees had further in-depth exchanges with her, spoke highly of the content of the lecture, and expressed interest for another lecture by Ming Zhong.