On December 1, the Asset Management Association of China (the "Association") issued the Notice on Investment Terms of Private Equity and Venture Capital Funds to private equity and venture capital fund managers, stating that if private equity and venture capital funds set equity repurchase terms, the relevant arrangements should be scientific and reasonable, with diversified exit objectives, and that they should not engage in non-private fund investment activities such as lending and "debt-like equity" in violation of regulations by utilizing repurchase arrangements, nor should they sign other equity repurchase terms that clearly deviate from the nature of equity investment and have clearly unreasonable rights and obligations. When exercising relevant rights on behalf of the fund, managers should fully consider the impact on the repurchase obligors and the private equity fund industry. Private equity and venture capital funds that have set listing objectives as triggers for repurchase terms are encouraged to engage in friendly consultations and take a long-term perspective with repurchase obligors, resolving interest disputes properly by adjusting repurchase objectives, extending repurchase periods, lowering repurchase interest rates (if any), or terminating equity repurchase agreements, thereby supporting the survival and growth of real economy enterprises (substantive enterprises/real economy enterprises).

When conducting equity investment business, private equity funds should thoroughly investigate the development trends of the target industry and the operational status of the target company, clearly stipulate the repurchase trigger conditions, the calculation method for the repurchase amount, and liability for breach of contract. Meanwhile, they need to anticipate the boundaries between commercial risks and changes in circumstances to avoid rights infringement (here translated in context as "damage to rights and interests") due to unclear stipulations or inadequate risk anticipation.

When claiming liquidated damages, private funds should adhere to the principle of "compensation as the primary objective and punishment as supplementary," with the agreed ratio of liquidated damages being equivalent to the actual losses incurred; excessively high liquidated damages may be adjusted by the court in accordance with the law.

The original shareholders of the target company cannot justify their repudiation of the repurchase obligation on the grounds of industry risks, as commercial risks do not fall under the circumstances applicable to a change of circumstances. The original shareholders should adhere to the principle of good faith and fully fulfill their contractual obligations.

When signing investment agreements, private equity funds should clearly stipulate the dispute resolution methods and the scope of application of arbitration clauses to ensure that there are explicit remedies for all types of subsequent investment-related disputes (including derivative disputes), thereby avoiding delays in dispute resolution procedures due to unclear stipulations.

When a private equity fund asserts that a third-party agreement impairs its core rights, such as the repurchase right, under the underlying investment agreement, it should first examine the dispute resolution method stipulated in the underlying agreement. If the essence of the dispute is related to the rights and obligations under the underlying agreement, even if it formally revolves around another agreement, it should still be bound by the arbitration clause in the underlying agreement and resolved through arbitration proceedings, rather than arbitrarily choosing litigation, otherwise, it may fail to safeguard its rights in a timely manner due to jurisdictional issues.

When private equity funds sign multiple related party agreements with counterparties, they should maintain consistency in dispute resolution methods, clarify the effectiveness connection between each agreement and the applicable rules for dispute jurisdiction, avoid problems such as "agreement conflicts" and "unclear jurisdiction paths", and ensure the efficiency of their own rights maintenance.

If the counterparty privately signs an agreement that may harm the legitimate rights and interests of the private equity fund, the private equity fund should promptly verify the content of the agreement and its relevance to the underlying investment agreement, and quickly protect its rights and interests in accordance with the agreed dispute resolution method. At the same time, relevant evidence should be retained to ensure sufficient evidence to prove the damage to its own rights and interests in the arbitration procedure.

The appointment of a representative by the executive partner of a limited partnership private equity fund is based on the delegation relationship and substantive association. When this basis is lost, the appointed representative has the right to request the removal of the business registration to avoid adverse effects such as high consumption restrictions due to identity binding. Limited partnership private equity funds should cooperate in handling necessary registration change procedures.

As the executive partner of a limited partnership private fund, a private fund manager should strictly comply with the investment obligations and management responsibilities stipulated in the partnership agreement. If the fund is expelled due to their own fault, they should promptly handle the registration of the change of appointed representative to avoid unnecessary legal risks to the appointed representative and the fund.

During the liquidation period of a limited partnership private equity fund, the boundary between "business activities" and "necessary registration changes" should be distinguished. For registration information adjustments that do not affect the liquidation work (such as appointing representatives to remove them), cooperation should be made in accordance with the law, and the "liquidation status" should not be abused to refuse to fulfill legal obligations.

If a limited partnership private equity fund claims that its executing partner has appointed a representative to perform their duties incorrectly, they should resolve the issue through legal means such as separate litigation, and cannot refuse to apply for identity removal registration on this grounds; The appointed representative should comply with the relevant regulations of private fund supervision during the performance of duties, standardize the use of fund funds, and avoid additional legal liabilities caused by illegal performance of duties.