Dr. Lin Lin is an Assistant Professor at NUS Law. She specializes in corporate law, corporate finance, venture capital and private equity, and Chinese law. She was a Visiting Scholar at Stanford Law School and the Arthur and Toni Rembe Rock Center for Corporate Governance at Stanford University (2012-2013), a Senior Visiting Fellow at the Harris Manchester College at University of Oxford (2019) and Visiting Professor at Melbourne Law School (2020).Her articles have been published or accepted in leading journals in her field, such as Stanford Journal of Law, Business
This article examines the existing regulatory framework governing venture capital in Singapore. I... more This article examines the existing regulatory framework governing venture capital in Singapore. It discusses the present legal structures and tax policies, and examines recent law reforms that aim to encourage fund managers to re-domicile their venture capital funds in Singapore, such as the introduction of the variable capital company and the simplified authorisation process for venture capital fund managers. This article proposes several reforms that will continue to improve the regulatory environment for venture capital in Singapore, such as introducing more liberal tax policies; modifying the limited partnership structure and extending the dual-class share structure to the Catalist board.
This article critically examines Singapore's experience in regulating and facilitating the growth... more This article critically examines Singapore's experience in regulating and facilitating the growth of the FinTech sector. Based on empirical data, this article discusses how Singapore has encouraged financial innovation and mitigated new risks brought by FinTech through institutional improvements and regulatory reforms. It also identifies potential regulatory limitations and challenges, and distills the methods by which these can be handled. This article seeks to provide valuable lessons to other countries on how best to improve the regulatory environment for FinTech.
The article inquires into the theories and operation of the limited partner's derivative action i... more The article inquires into the theories and operation of the limited partner's derivative action in the context of China. The revised Partnership Enterprise Law provides a new remedy for the limited partner to pursue an action in its own name to safeguard the interests of the limited partnership. However, the law does not set forth a basic legal framework for bringing such an action. By identifying the special features of the private equity market of China and the defi ciency of other remedial mechanisms to the limited partners, this article discusses the needs of the derivative action in the private equity limited partnerships. It also proposes special rules that are in line with the Chinese market condition.
The rise of the crypto economy brings promises and perils to the venture capital industry. Distri... more The rise of the crypto economy brings promises and perils to the venture capital industry. Distributed ledger technologies offer new investment opportunities to venture capitalists (VCs). Traditional VCs are gradually diversifying their portfolios to invest in crypto-assets and blockchain technology projects, as well as launching crypto-centric funds. Simultaneously, venture capital funds are developing various hybrid financing models to adopt and imitate the fundraising mechanism of initial coin offerings. However, the polymorphous and evolving features of crypto-assets also introduce new risks to the venture capital market. The paper therefore examines the emerging models in the venture capital crypto landscape, identifies the new risks of the crypto economy, and examines the current regulatory and contractual solutions. The paper also proposes recommendations for the venture capital crypto landscape going forward, including heightened regulations on crypto-centric funds and fund managers. Abstract .
There is little empirical work examining contractual innovation in the context of China, which is... more There is little empirical work examining contractual innovation in the context of China, which is the second largest venture capital market in the world, after the United States. Drawing upon extensive interviews, a hand-collected dataset of investment agreements and judgments made by Chinese courts on venture capital disputes, this article examines a unique contractual design that is common in the Chinese venture capital sector—the valuation adjustment mechanism (“VAM”). A VAM provides investors with a right to adjust a portfolio company’s original valuation and to get compensation by cash or equity upon the occurrence of certain future events (such as failing to meet financial or non-financial performance indicators). The prevalence of VAMs in China is potentially attributable to:
(1) severe information asymmetry in the less informed market,
(2) the lack of convertible preferred stock under Chinese law and excessive legal restrictions over investment tools and contractual mechanisms in venture capital financing, and
(3) insufficient legal protection for investors under Chinese law.
This article argues that, unlike American venture capital contracts, which are designed to encourage long-term, sustainable investor-entrepreneur relationships, VAMs are predominantly investors’ self-help mechanisms to address specific and serious investor protection issues in the transitional and less informed Chinese market. Thus, it suggests that the problems regarding investor protection motivating the use of VAMs can be better solved by law reforms such as allowing limited liability companies to issue convertible preferred stock, introducing more legal remedies for minority investors, as well as an improved regulatory environment governing venture financing.
Dora Neo, Hans Tjio and Lan Luh Luh eds., Financial Services Law and Regulation(Academy Publishing, 2019) Chapter 14, pp 563-594, 2019
This chapter sets out the growing importance of private equity for Singapore’s economy and provid... more This chapter sets out the growing importance of private equity for Singapore’s economy and provides an overview of the existing regulatory framework governing private equity in Singapore. It outlines the present legal structures and tax policies and highlights their inadequacy in encouraging fund managers to domicile the funds in Singapore. Thereafter, this chapter recognizes several promising legislative and regulatory developments that will bolster Singapore’s position as an onshore hub for private equity funds if such developments were actualized. It also proposes further reforms that will improve the operating environment for private equity funds such as introducing more liberal tax policies and modifying the limited partnership structure.
Although current academic thinking tells us that private equity investors are generally passive i... more Although current academic thinking tells us that private equity investors are generally passive in the management of funds, Chinese private equity market is dominated by funds whose investors are relatively active. The interference of limited partners in a fund's management triggers internal confl icts between partners. This article examines the legal and practical reasons for this phenomenon. Based on extensive interviews with market participants, it is found that the agency problems, the legal weaknesses of limited partners under Chinese law and several regulatory constraints on China's private equity industry have infl uenced the decisions of investors to pursue active strategies in funds. This article also examines the effectiveness of the control rule and a few of the common private contractual arrangements in addressing the agency problem in the context of Chinese private equity funds, and suggests strategies to mitigate the problem.
Existing literature suggests a strong relationship between a vibrant venture capital market and a... more Existing literature suggests a strong relationship between a vibrant venture capital market and an active stock market: venture capital flourishes when venture capitalists can readily exit from successful portfolio companies through IPOs, and IPOs are in turn facilitated by active and efficient stock markets. This article uses China as a case study to explore the connection between the stock market and venture capital market. Through empirical studies, this article confirms the existing literature by demonstrating a close connection between the stock market and venture capital market in China. It also refines the existing literature by finding that, for venture capital availability, laws and policies also matter in China. Strong and sustained law reforms and government policies aimed at improving the institutional structure and regulatory environment of the stock market can facilitate venture capital-backed exits, which in turn lead to an increase in new venture capital availability in China. Nonetheless, numerous IPO closures have led to freeze-ups in China's venture capital market. Also, there remain a multiplicity of institutional impediments to the efficient operation of the stock market and the effective implementation of IPO reforms in China. These may in turn hinder the development of the Chinese venture capital industry.
The Chinese experience shows that equity crowdfunding (ECF) platforms are not neutral intermediar... more The Chinese experience shows that equity crowdfunding (ECF) platforms are not neutral intermediaries in linking investment opportunities with sources of funds. This article contends that, in the context of the Chinese market, private ordering alone will not address the agency and information asymmetry problems inherent in ECF platforms. The contractual designs adopted by numerous Chinese platforms, especially that of the syndicate contract, not only fail to address the conflicting interests but also introduce additional conflicts. Other market mechanisms such as reputation, exit and private insurance, are also insufficient to ensure investor protection. Therefore, this article proposes specific regulatory measures to enhance investor protection.
Unlike in the United States and European Union markets, where typical concerns about private equi... more Unlike in the United States and European Union markets, where typical concerns about private equity have centered around excessive leverage, systemic risk and short-termism, the recent market concerns in China have centered around illicit fundraising activities and misappropriation of funds. The evidence of market failure in China challenges the conventional view that private equity is a highly competitive market involving sophisticated investors and that the relationships between managers (general partners) and investors (limited partners) require no regulatory attention. After studying a hand-collected dataset of seventy Chinese private equity limited partnership agreements, this article finds that contractual designs on partners' duties fail to effectively constrain misconduct by general partners. Although Chinese regulators are strengthening the regulation of the private equity sector to address managerial abuse, the large majority of the measures are piecemeal and have come in the form of temporary provisions. There is no equivalent concept of equitable fiduciary duties in Chinese partnership law and the statutory provisions imposing duties on partners are wholly inadequate. Also, attempts to rely on administrative measures and self-regulation by the relevant bodies to close the gaps have proven to be ineffective. Therefore, I advocate that the regulatory focus should be on imposing specific statutory duties on fund managers to enhance protection in response to an ever-changing industry. Singapore, who have generously shared their knowledge and insights with me. They are the fund managers, private equity lawyers, legal counsels of private equity firms, venture capitalists, entrepreneurs, individual investors and representatives of institutional investors who were willing to answer my questions and in some cases, provide the limited partnership agreements that are the focus of this Article. Interviews were conducted on an anonymous, background basis. I would like to thank Zenichi Shishido, Dirk Andreas Zetsche, Miu Ruobing, Wu Wei and Walter Wan Weiqi for their comments. The research is supported by the NUS Start-up Grant (WBS No: R-241-000-134-133). All errors remain my own. 2
This article analyzes Professor Ronald Gilson's theory of " simultaneity " in engineering a ventu... more This article analyzes Professor Ronald Gilson's theory of " simultaneity " in engineering a venture capital market in the context of China. Based on both quantitative and qualitative data collected by the author, this article analyzes how China has created the fastest developing and the largest engineered venture capital market in the world within three decades. It concludes that the rise of venture capital in China is attributable to (1) increasing capital supply through various governmental programs, easing regulatory barriers towards institutional and foreign investors, providing tax incentives, and improving the exit environment; (2) enhancing the availability of financial intermediaries by introducing the limited partnership that creates an efficient relationship between venture capitalists and investors; and (3) encouraging entrepreneurship by improving the regulatory environment for small businesses. Through these measures, China has facilitated the simultaneous availability of capital with the appetite for high-risk, long-term investments and the emergence of a class of entrepreneurs with the skills and incentives to put that capital to work. One key factor of the rapid development of the Chinese market has been its increased reliance on market forces in allocating capital. On the other hand, a residual degree of bureaucratic involvement in capital allocation prevents the Chinese regime from being fully efficient. China serves as an (imperfect) model for other governments in the world where unfettered market forces have not brought about successful venture capital markets.
This article examines the existing regulatory framework governing venture capital in Singapore. I... more This article examines the existing regulatory framework governing venture capital in Singapore. It discusses the present legal structures and tax policies, and examines recent law reforms that aim to encourage fund managers to re-domicile their venture capital funds in Singapore, such as the introduction of the variable capital company and the simplified authorisation process for venture capital fund managers. This article proposes several reforms that will continue to improve the regulatory environment for venture capital in Singapore, such as introducing more liberal tax policies; modifying the limited partnership structure and extending the dual-class share structure to the Catalist board.
This article critically examines Singapore's experience in regulating and facilitating the growth... more This article critically examines Singapore's experience in regulating and facilitating the growth of the FinTech sector. Based on empirical data, this article discusses how Singapore has encouraged financial innovation and mitigated new risks brought by FinTech through institutional improvements and regulatory reforms. It also identifies potential regulatory limitations and challenges, and distills the methods by which these can be handled. This article seeks to provide valuable lessons to other countries on how best to improve the regulatory environment for FinTech.
The article inquires into the theories and operation of the limited partner's derivative action i... more The article inquires into the theories and operation of the limited partner's derivative action in the context of China. The revised Partnership Enterprise Law provides a new remedy for the limited partner to pursue an action in its own name to safeguard the interests of the limited partnership. However, the law does not set forth a basic legal framework for bringing such an action. By identifying the special features of the private equity market of China and the defi ciency of other remedial mechanisms to the limited partners, this article discusses the needs of the derivative action in the private equity limited partnerships. It also proposes special rules that are in line with the Chinese market condition.
The rise of the crypto economy brings promises and perils to the venture capital industry. Distri... more The rise of the crypto economy brings promises and perils to the venture capital industry. Distributed ledger technologies offer new investment opportunities to venture capitalists (VCs). Traditional VCs are gradually diversifying their portfolios to invest in crypto-assets and blockchain technology projects, as well as launching crypto-centric funds. Simultaneously, venture capital funds are developing various hybrid financing models to adopt and imitate the fundraising mechanism of initial coin offerings. However, the polymorphous and evolving features of crypto-assets also introduce new risks to the venture capital market. The paper therefore examines the emerging models in the venture capital crypto landscape, identifies the new risks of the crypto economy, and examines the current regulatory and contractual solutions. The paper also proposes recommendations for the venture capital crypto landscape going forward, including heightened regulations on crypto-centric funds and fund managers. Abstract .
There is little empirical work examining contractual innovation in the context of China, which is... more There is little empirical work examining contractual innovation in the context of China, which is the second largest venture capital market in the world, after the United States. Drawing upon extensive interviews, a hand-collected dataset of investment agreements and judgments made by Chinese courts on venture capital disputes, this article examines a unique contractual design that is common in the Chinese venture capital sector—the valuation adjustment mechanism (“VAM”). A VAM provides investors with a right to adjust a portfolio company’s original valuation and to get compensation by cash or equity upon the occurrence of certain future events (such as failing to meet financial or non-financial performance indicators). The prevalence of VAMs in China is potentially attributable to:
(1) severe information asymmetry in the less informed market,
(2) the lack of convertible preferred stock under Chinese law and excessive legal restrictions over investment tools and contractual mechanisms in venture capital financing, and
(3) insufficient legal protection for investors under Chinese law.
This article argues that, unlike American venture capital contracts, which are designed to encourage long-term, sustainable investor-entrepreneur relationships, VAMs are predominantly investors’ self-help mechanisms to address specific and serious investor protection issues in the transitional and less informed Chinese market. Thus, it suggests that the problems regarding investor protection motivating the use of VAMs can be better solved by law reforms such as allowing limited liability companies to issue convertible preferred stock, introducing more legal remedies for minority investors, as well as an improved regulatory environment governing venture financing.
Dora Neo, Hans Tjio and Lan Luh Luh eds., Financial Services Law and Regulation(Academy Publishing, 2019) Chapter 14, pp 563-594, 2019
This chapter sets out the growing importance of private equity for Singapore’s economy and provid... more This chapter sets out the growing importance of private equity for Singapore’s economy and provides an overview of the existing regulatory framework governing private equity in Singapore. It outlines the present legal structures and tax policies and highlights their inadequacy in encouraging fund managers to domicile the funds in Singapore. Thereafter, this chapter recognizes several promising legislative and regulatory developments that will bolster Singapore’s position as an onshore hub for private equity funds if such developments were actualized. It also proposes further reforms that will improve the operating environment for private equity funds such as introducing more liberal tax policies and modifying the limited partnership structure.
Although current academic thinking tells us that private equity investors are generally passive i... more Although current academic thinking tells us that private equity investors are generally passive in the management of funds, Chinese private equity market is dominated by funds whose investors are relatively active. The interference of limited partners in a fund's management triggers internal confl icts between partners. This article examines the legal and practical reasons for this phenomenon. Based on extensive interviews with market participants, it is found that the agency problems, the legal weaknesses of limited partners under Chinese law and several regulatory constraints on China's private equity industry have infl uenced the decisions of investors to pursue active strategies in funds. This article also examines the effectiveness of the control rule and a few of the common private contractual arrangements in addressing the agency problem in the context of Chinese private equity funds, and suggests strategies to mitigate the problem.
Existing literature suggests a strong relationship between a vibrant venture capital market and a... more Existing literature suggests a strong relationship between a vibrant venture capital market and an active stock market: venture capital flourishes when venture capitalists can readily exit from successful portfolio companies through IPOs, and IPOs are in turn facilitated by active and efficient stock markets. This article uses China as a case study to explore the connection between the stock market and venture capital market. Through empirical studies, this article confirms the existing literature by demonstrating a close connection between the stock market and venture capital market in China. It also refines the existing literature by finding that, for venture capital availability, laws and policies also matter in China. Strong and sustained law reforms and government policies aimed at improving the institutional structure and regulatory environment of the stock market can facilitate venture capital-backed exits, which in turn lead to an increase in new venture capital availability in China. Nonetheless, numerous IPO closures have led to freeze-ups in China's venture capital market. Also, there remain a multiplicity of institutional impediments to the efficient operation of the stock market and the effective implementation of IPO reforms in China. These may in turn hinder the development of the Chinese venture capital industry.
The Chinese experience shows that equity crowdfunding (ECF) platforms are not neutral intermediar... more The Chinese experience shows that equity crowdfunding (ECF) platforms are not neutral intermediaries in linking investment opportunities with sources of funds. This article contends that, in the context of the Chinese market, private ordering alone will not address the agency and information asymmetry problems inherent in ECF platforms. The contractual designs adopted by numerous Chinese platforms, especially that of the syndicate contract, not only fail to address the conflicting interests but also introduce additional conflicts. Other market mechanisms such as reputation, exit and private insurance, are also insufficient to ensure investor protection. Therefore, this article proposes specific regulatory measures to enhance investor protection.
Unlike in the United States and European Union markets, where typical concerns about private equi... more Unlike in the United States and European Union markets, where typical concerns about private equity have centered around excessive leverage, systemic risk and short-termism, the recent market concerns in China have centered around illicit fundraising activities and misappropriation of funds. The evidence of market failure in China challenges the conventional view that private equity is a highly competitive market involving sophisticated investors and that the relationships between managers (general partners) and investors (limited partners) require no regulatory attention. After studying a hand-collected dataset of seventy Chinese private equity limited partnership agreements, this article finds that contractual designs on partners' duties fail to effectively constrain misconduct by general partners. Although Chinese regulators are strengthening the regulation of the private equity sector to address managerial abuse, the large majority of the measures are piecemeal and have come in the form of temporary provisions. There is no equivalent concept of equitable fiduciary duties in Chinese partnership law and the statutory provisions imposing duties on partners are wholly inadequate. Also, attempts to rely on administrative measures and self-regulation by the relevant bodies to close the gaps have proven to be ineffective. Therefore, I advocate that the regulatory focus should be on imposing specific statutory duties on fund managers to enhance protection in response to an ever-changing industry. Singapore, who have generously shared their knowledge and insights with me. They are the fund managers, private equity lawyers, legal counsels of private equity firms, venture capitalists, entrepreneurs, individual investors and representatives of institutional investors who were willing to answer my questions and in some cases, provide the limited partnership agreements that are the focus of this Article. Interviews were conducted on an anonymous, background basis. I would like to thank Zenichi Shishido, Dirk Andreas Zetsche, Miu Ruobing, Wu Wei and Walter Wan Weiqi for their comments. The research is supported by the NUS Start-up Grant (WBS No: R-241-000-134-133). All errors remain my own. 2
This article analyzes Professor Ronald Gilson's theory of " simultaneity " in engineering a ventu... more This article analyzes Professor Ronald Gilson's theory of " simultaneity " in engineering a venture capital market in the context of China. Based on both quantitative and qualitative data collected by the author, this article analyzes how China has created the fastest developing and the largest engineered venture capital market in the world within three decades. It concludes that the rise of venture capital in China is attributable to (1) increasing capital supply through various governmental programs, easing regulatory barriers towards institutional and foreign investors, providing tax incentives, and improving the exit environment; (2) enhancing the availability of financial intermediaries by introducing the limited partnership that creates an efficient relationship between venture capitalists and investors; and (3) encouraging entrepreneurship by improving the regulatory environment for small businesses. Through these measures, China has facilitated the simultaneous availability of capital with the appetite for high-risk, long-term investments and the emergence of a class of entrepreneurs with the skills and incentives to put that capital to work. One key factor of the rapid development of the Chinese market has been its increased reliance on market forces in allocating capital. On the other hand, a residual degree of bureaucratic involvement in capital allocation prevents the Chinese regime from being fully efficient. China serves as an (imperfect) model for other governments in the world where unfettered market forces have not brought about successful venture capital markets.
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(1) severe information asymmetry in the less informed market,
(2) the lack of convertible preferred stock under Chinese law and excessive legal restrictions over investment tools and contractual mechanisms in venture capital financing, and
(3) insufficient legal protection for investors under Chinese law.
This article argues that, unlike American venture capital contracts, which are designed to encourage long-term, sustainable investor-entrepreneur relationships, VAMs are predominantly investors’ self-help mechanisms to address specific and serious investor protection issues in the transitional and less informed Chinese market. Thus, it suggests that the problems regarding investor protection motivating the use of VAMs can be better solved by law reforms such as allowing limited liability companies to issue convertible preferred stock, introducing more legal remedies for minority investors, as well as an improved regulatory environment governing venture financing.
(1) severe information asymmetry in the less informed market,
(2) the lack of convertible preferred stock under Chinese law and excessive legal restrictions over investment tools and contractual mechanisms in venture capital financing, and
(3) insufficient legal protection for investors under Chinese law.
This article argues that, unlike American venture capital contracts, which are designed to encourage long-term, sustainable investor-entrepreneur relationships, VAMs are predominantly investors’ self-help mechanisms to address specific and serious investor protection issues in the transitional and less informed Chinese market. Thus, it suggests that the problems regarding investor protection motivating the use of VAMs can be better solved by law reforms such as allowing limited liability companies to issue convertible preferred stock, introducing more legal remedies for minority investors, as well as an improved regulatory environment governing venture financing.