Analysis of Guaranteed Redemption Commitments in Fund Contracts in China

Title: Legal Validity of Guaranteed Redemption Clauses in China’s Private Equity Fund Markets

In recent years, the inclusion of guaranteed redemption clauses in fund contracts has become a crucial factor for cautious investors in China’s private equity fund markets. However, disputes often arise when fund managers or third parties fail to fulfill these commitments.

According to legal experts, guaranteed redemption commitments made by fund managers are considered invalid under Chinese regulations. The Guiding Opinions on Regulating the Asset Management Business of Financial Institutions explicitly prohibits fund managers from making capital preservation and guaranteed returns commitments. Similarly, the Securities Investment Fund Law of China prohibits investment advisory institutions from making any form of commitment or guarantee regarding investment returns.

There are differing views on the validity of capital preservation and guaranteed returns commitments made by third parties. While some precedents consider these commitments valid, others argue that they violate relevant regulations and should be deemed invalid.

The article also discusses the validity of agreements stipulating the return of principal after the determination of losses, which are generally considered valid in judicial practice.

Furthermore, there is a debate on whether the invalidity of guaranteed redemption clauses leads to the overall invalidity of the fund contract. While some argue for the invalidation of the entire contract, others believe that only clauses guaranteeing fixed returns should be deemed invalid.

In conclusion, the focus remains on protecting investor rights and maintaining the order of financial market transactions through lawful judgments. Private fund managers are advised to prioritize compliance with financial regulatory provisions to avoid penalties. Investors are encouraged to make rational investments and understand the risks associated with financial products.

Legal expert Yang Jiamei from Kangda Law Firm provided insights on these legal matters and can be contacted for further information.

This news story sheds light on the legal validity of guaranteed redemption clauses in China’s private equity fund markets, highlighting the importance of compliance and investor awareness in the financial sector.