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PE Hotspot: Firms Do Uneasy Dance With Chinese Rulers
As mentioned in: Private Equity Law360November 2, 2011
Private Equity Law360 reports on doing business in China: while the country provides lucrative investment opportunities, the government’s often unpredictable rules and regulations pose some difficulties.
Given the challenges of navigating the Chinese political and regulatory landscapes, one of the types of Renminbi funds (also called "RMB funds") used are so-called "parallel funds," created as contractual agreements between Chinese nationals and Western investors to gather and utilize capital.
However, according to Pillsbury China practice attorneys Michael Wu and Judy Deng, the mere structure of a fund does not bypass the need for investors to ask important questions. They point out that risks with such parallel funds vary from fund to fund and largely depend on the managers' expectations and the equity structure.
"The managers generally need to address conflicts of interest issues regarding the allocation of deal flow and profits between the two funds," they explain.
