A critical analysis of the legal environment in respect of the private equity industry in South Africa

[摘要] ENGLISH ABSTRACT : This dissertation aims to answer a fundamental question relating to the South African legal andeconomic framework in which private equity operates. This being:To what extent does the law address/regulate the structure of private equity funds and therelationships between the various parties related to a fund, that is: investors, the fund managerand underlying portfolio investments? This thesis also discussed how the law could betterregulate the private equity industry.The dissertation consists of five chapters. Chapter one raises such fundamental questions as 'whatis the nature of private equity?' by looking at the parties involved, the private equity cycle, returns,liquidity, the risk, and the private equity market. In addition, it assesses whether private equitysatisfies the criteria to be regarded as a separate asset class.Chapter two provides an analysis of the key features of private equity fund formation in South Africa.The choice of the most appropriate legal structure of a private equity fund starts with the choice ofthe most effective and suitable legal vehicle. Chapter two includes a discussion of the general privateequity fund structure, the regulatory requirements of private equity firms, and certain regulatoryconsiderations relevant in operating a private equity fund in South Africa. The discussion at certaininstances reference private equity fund formation in foreign jurisdictions such the US, UK, Australia,and Canada.Chapter three introduces an analysis of corporate governance as it pertains to private equity funds.Firstly, it discusses the role of corporate governance regulation in stimulating investment. Secondly,it discusses the importance and benefits of corporate governance from the perspective of privateequity managers; and seeks to explain the link between the private equity business model andcorporate governance that is based on the assertion that there are two levels of corporategovernance involved in private equity investing. The first level of governance relates to the privateequity fund's underlying portfolio investee companies and this includes inter alia, a discussion on theduties of the fund manager, particularly in their capacity as serving as directors on the boards ofsuch companies. The second level of governance relates to the private equity fund itself whichfocuses on the relationship between the private equity firm and the investors that invest in the privateequity fund.Chapter four examines two key impediments namely tax legislation and exit alternatives; and showhow legislation could effectively address the former and how the lack of exit routes is an impedimentto the growth of the local private equity industry.Chapter five states that, the development of the above mentioned regulatory framework will only besuccessful if the private equity industry participants themselves acknowledge and actively addressthe disadvantages and real risks posed by the private equity industry on the South African financialsystem.

[发布机构] Stellenbosch University