Click here to download the private equity (fund formation) 2019 report, published by Getting the Deal Through.

Jurisdictions covered

The following 22 jurisdictions are covered in this report:

Australia; Austria; Brazil; British Virgin Islands; Canada; Cayman Islands; China; Colombia; Croatia; Egypt; Germany; Indonesia; Israel; Italy; Japan; Korea; Luxembourg; Saudi Arabia; Spain; Switzerland; United Kingdom; United States.

Questions

The set of questions relating to the topic of private equity (fund formation) and answered by the guide for each jurisdiction covered include:

Formation and terms operation

• • What legal form of vehicle is typically used for private equity funds formed in your jurisdiction? Does such a vehicle have a separate legal personality or existence under the law of your jurisdiction? In either case, what are the legal consequences for investors and the manager?
• • What is the process for forming a private equity fund vehicle in your jurisdiction?
• • Is a private equity fund vehicle formed in your jurisdiction required to maintain locally a custodian or administrator, a registered office, books or records, or a corporate secretary, and how is that requirement typically satisfied?
• • What access to information about a private equity fund formed in your jurisdiction is the public granted by law? How is it accessed? If applicable, what are the consequences of failing to make such information available?
• • In what circumstances would the limited liability of third-party investors in a private equity fund formed in your jurisdiction not be respected as a matter of local law?
• • What are the fiduciary duties owed to a private equity fund formed in your jurisdiction and its third-party investors by that fund manager (or other similar control party or fiduciary) under the laws of your jurisdiction, and to what extent can those fiduciary duties be modified by agreement of the parties?
• • Does your jurisdiction recognise a “gross negligence” (as opposed to “ordinary negligence”) standard of liability applicable to the management of a private equity fund?
• • Are there any other special issues or requirements particular to private equity fund vehicles in your jurisdiction? Is conversion or redomiciling to vehicles in your jurisdiction permitted? If so, in converting or redomiciling limited partnerships formed in other jurisdictions into limited partnerships in your jurisdiction, what are the most material terms that typically must be modified?
• • With respect to institutional sponsors of private equity funds organised in your jurisdiction, what are some of the primary legal and regulatory consequences and other key issues for the private equity fund and it general partner and investment adviser arising out of a bankruptcy, insolvency, change of control, restructuring or similar transaction of the private equity fund's sponsor?

Regulation, licensing and registration

• • What are the principal regulatory bodies that would have authority over a private equity fund and its manager in your jurisdiction, and what are the regulators' audit and inspection rights and managers regulatory reporting requirements to investors and regulators?
• • What are governmental approval, licensing or registration requirements applicable to a private equity fund in your jurisdiction? Does it make a difference whether there are significant investment activities in your jurisdiction?
• • Is a private equity fund's manager, or any of its officer, directors or control persons, required to register as an investment adviser in your jurisdiction?
• • Are there any specific qualifications or other requirements imposed on a private equity fund's manager, or any of its officers, directors or control persons in your jurisdiction?
• • Describe any rules (or policies of public pension plans or other government entities) in your jurisdiction that restrict, or require disclosure of, political contributions by a private equity fund's manager or investment adviser or their employees.
• • Describe any rules (or policies of public pension plans or other governmental entities) in your jurisdiction that restrict, or require disclosure by a private equity fund’s manager or investment adviser of, the engagement of placement agents, lobbyists or other intermediaries in the marketing of the fund to public pension plans and other governmental entities. Describe any rules that require a fund’s investment adviser or its employees and agents to register as lobbyists in the marketing of the fund to public pension plans and governmental entities.
• • Describe any legal or regulatory developments emerging from the recent global financial crisis that specifically affect banks with respect to investing in or sponsoring private equity funds.

Taxation

• • Would a private equity fund vehicle formed in your jurisdiction be subject to taxation there with respect to its income or gains? Would the fund be required to withhold taxes with respect to distributions to investors? Please describe what conditions, if any, apply to a private equity fund to qualify for applicable tax exemptions.
• • Would non-resident investors in a private equity fund be subject to taxation or return-filing requirements in your jurisdiction?
• • Is it necessary or desirable to obtain a ruling from local tax authorities with respect to the tax treatment of a private equity fund vehicle formed in your jurisdiction? Are there any special tax rules relating to investors that are residents of your jurisdiction?
• • Must any significant organisational taxes be paid with respect to private equity funds organised in your jurisdiction?
• • Please describe briefly what special tax considerations, if any, apply with respect to a private equity fund’s sponsor.
• • Please list any relevant tax treaties to which your jurisdiction is a party and how such treaties apply to the fund vehicle.
• • Are there any other significant tax issues relating to private equity funds organised in your jurisdiction?

Selling restrictions and investors generally

• • Describe the principal legal and regulatory restrictions on offers and sales of interests in private equity funds formed in your jurisdiction, including the type of investors to whom such funds (or private equity funds formed in other jurisdictions) may be offered without registration under applicable securities laws in your jurisdiction.
• • Describe any restrictions on the types of investors that may participate in private equity funds formed in your jurisdiction (other than those imposed by applicable securities laws described above).
• • Does your jurisdiction require any ongoing filings with, or notifications to, regulators regarding the identity of investors in private equity funds (including by virtue of transfers of fund interests) or regarding the change in the composition of ownership, management or control of the fund or the manager?
• • Does your jurisdiction require that the person offering interests in a private equity fund have any licences or registrations?
• • Describe any money laundering rules or other regulations applicable in your jurisdiction requiring due diligence, record keeping or disclosure of the identities of (or other related information about) the investors in a private equity fund or the individual members of the sponsor.

Exchange listing

• • Are private equity funds able to list on a securities exchange in your jurisdiction and, if so, is this customary? What are the principal initial and ongoing requirements for listing? What are the advantages and disadvantages of a listing?
• • To what extent can a listed fund restrict transfers of its interests?
• • Are funds formed in your jurisdiction subject to any legal or regulatory restrictions that affect their participation in private equity transactions or otherwise affect the structuring of private equity transactions completed inside or outside your jurisdiction?
• • Describe any legal or regulatory issues that would affect the structuring of the sponsor’s compensation and profit-sharing arrangements with respect to the fund and, specifically, anything that could affect the sponsor’s ability to take management fees, transaction fees and a carried interest (or other form of profit share) from the fund.