The amendment of China's Partnership Enterprises Law in 2006 makes it feasible for a fund manager to establish a private equity fund (hereinafter referred to as “Private Equity Fund” or“Fund”) in the form of limited partnership in China, which has long been a common international practice. In recent years, thousands of Funds established in the form of limited partnership (“LP-fund”) have been springing up all over the country, with assets under management of hundreds of billions renminbi. Funds in the form of limited partnership have already become mainstream in China. Over the next four or five years, as these LP-funds enter into middle or late phases of their investment period and many of their investee companies start to look for exit, the structure adopted by these LP-funds during its formation at the beginning will have a direct impact on whether such LP-funds and their fund managers can exit their investee companies at a low cost. This article will mainly focus on the creative use of limited partnership form to management enterprises or general partners of LP funds, and how it can help optimize the whole fund structure.
