The newly revised Administrative Measures for the Significant Asset Restructuring of Listed Companies encourage private equity funds to participate in mergers and acquisitions of listed companies and, for the first time, introducing a "reverse linkage" mechanism for private equity funds.
Originally adopted on March 24, 2008, the measures officially came into effect on May 18 of the same year.
The new regulations implement a "reverse linkage" between the investment duration of private equity funds and the lock-up period for shares acquired through restructuring.
Specifically, if a private equity fund has an investment duration of at least 48 months, the lock-up period in third-party transactions will be shortened from 12 months to 6 months, and in restructuring listings where the fund is considered a minority shareholder, the lock-up period will be reduced from 24 months to 12 months.
This institutional arrangement helps encourage private equity funds to participate in mergers and acquisitions of listed companies, effectively alleviates the problem of "difficult exit," and facilitates a virtuous cycle of fundraising, investment and financing, post-investment management, and capital exit.
"Encouraging private equity investment funds to act as patient capital and invest in the field of technological innovation helps channel resources toward new quality productive forces. This is expected to foster the emergence of more influential and high-potential 'unicorn' companies, which is of great significance for promoting China's economic transformation and achieving sustainable growth," said Dong Ximiao, chief researcher of Merchants Union Consumer Finance Co., Ltd.
Reverse linkage mechanism introduced for private equity funds for first time
