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In recent years, with the rapid development of the private - equity fund industry, conflicts between investors and fund managers have become increasingly common amid economic fluctuations and investment uncertainties. From an investors perspective, this article examines practical approaches and potential challenges investors may encounter when dealing with private - equity fund disputes.

1. Basic Concepts
(1) Private - equity funds, related institutions, practitioners
- What is a private - equity fund
A private investment fund, or simply a private fund, is an investment vehicle established through private placement of capital within the Peoples Republic of China. These funds are primarily categorized four types: private securities investment funds, private - equity funds, venture - capital funds, and other private investment funds.
- Participants in private - fund raising, operation, and withdrawal
The fundraising, investment, and operation of private - equity funds involve multiple stakeholders. These entities not only foster collaboration and mutual oversight but also create complex legal relationships. Understanding the roles, identities, and contributions of each participant in private - equity funds helps investors accurately identify the responsible parties when disputes arise, ensuring their rights are properly addressed.
- Private - Fund Shareholders**: Individuals who acquire private - fund shares to become investors, asset owners, and beneficiaries of investment returns. Under contractual agreements and applicable laws, they enjoy rights including asset returns, information access, decision - making participation, and exit options, while also bearing obligations such as capital contribution and risk assumption. Private - fund shareholders must be qualified investors.
- A private - fund manager** is an institution that leverages specialized knowledge and experience to utilize the assets of the funds it manages. In accordance with laws, regulations, and the funds articles of association or investment contract, it makes investment decisions based on scientific portfolio principles, aiming to continuously increase the value of the managed assets and maximize returns for fund holders. As the fundraiser and manager of the fund product, the manager is entrusted with the fiduciary responsibility to prudently and diligently manage the funds assets. The manager is entitled to receive corresponding income as stipulated in the agreement.
- A private - fund custodian** is an entity authorized by laws, regulations, and custodian agreements to manage private funds, including asset custody, transaction oversight, information disclosure, fund settlement, and accounting. Typically appointed by commercial banks or other financial institutions approved by the China Securities Regulatory Commission (CSRC), these custodians are responsible for asset preservation and transaction supervision.
- Distributor of funds**: an institution that has been registered with the China Securities Regulatory Commission or its dispatched agencies, has obtained the qualification for fund sales, accepts the entrustment of the fund manager, sells fund products as an agent, and collects sales commission.
- Private - fund practitioners**: According to the Securities Investment Fund Law of the Peoples Republic of China, fund practitioners shall possess fund - practitioner qualifications and authorize the China Securities Investment Fund Association to organize the qualification management of fund practitioners. In the process of fundraising, investment, and operation of private funds, the actual actions taken by practitioners are one of the important bases for attributing their official duties to relevant entities.

2. Analysis of claims from an investors perspective
When a dispute arises from a private fund, the most important thing for the parties concerned is the settlement of the dispute. The way and approach of dispute settlement should be analyzed according to the specific case of different cases, and the most appropriate way of dispute settlement should be chosen in different cases.
 (1) The right of claim and the effect of the right of claim
- A claim arising from a contract
The core of the claim arising from the contract is the contract. In the disputes arising from the private fund, the claim for the contract also varies according to different situations and different subjects.
- Situation 1: The right to request termination of the contract
- Agreed termination right**: According to Article 562 of the Civil Code of the Peoples Republic of China, "The parties may terminate the contract by mutual agreement. The parties may agree on the grounds for one party to terminate the contract. When the grounds for termination occur, the party with the right to terminate the contract may terminate the contract." For the sake of fund stability and interests, the fund manager rarely stipulates the termination circumstances in the Fund Contract, except that the investor has a 24 - hour investment cooling - off period after the signing of the fund contract, and the investor has the right to terminate the contract before the successful follow - up confirmation by the fundraising institution.
- Statutory Right to Terminate**: Pursuant to Article 563 of the Civil Code, a party may terminate a contract under any of the following circumstances: (1) The contracts purpose becomes unachievable due to force majeure; (2) A party expressly declares or demonstrates through conduct prior to the performance deadline that it will not fulfill its principal obligations; (3) A party delays performance of its principal obligations and fails to fulfill them within a reasonable period after being duly notified; (4) A partys delayed performance or other breaches render the contracts purpose unachievable; (5) Other circumstances prescribed by law. The determination of statutory termination rights hinges on whether the contracts purpose can be realized, with judicial authorities applying stringent standards. For instance, when a private - fund manager fails to successfully raise capital, making the contracts purpose unachievable, investors may exercise their statutory right to terminate the private - fund agreement.
- Legal Effects of Contract Termination**: Pursuant to Article 566 of the Civil Code, upon contract termination, unperformed obligations shall cease immediately. For obligations already performed, parties may request restoration to the original status or take other remedial measures based on performance circumstances and contractual nature, while retaining the right to claim damages. If termination results from breach of contract, the entitled party may demand liability from the breaching party, unless otherwise agreed. Accordingly, when a private - equity fund contract terminates, investors may demand the fund manager to return principal and interest.
- Case 2: The investor and the fund manager sign the **** Private - Fund Contract. If the fund manager breaches the contract, it shall be liable for breach of contract**
As a party to the Private - Equity Fund Contract, the fund manager bears corresponding obligations under the agreement. While specific duties vary across different fund contracts, legal frameworks and judicial precedents indicate that private - equity fund managers must fulfill four core obligations: suitability obligations, good - faith obligations, due - diligence obligations, and information - disclosure obligations. In legal proceedings, determining which specific obligations the fund manager has breached requires a case - by - case assessment based on the fund contract and relevant factual circumstances.
Article 577 of the Civil Code stipulates: "If a party fails to perform its contractual obligations or performs them in a manner inconsistent with the agreement, it shall bear liability for breach of contract, including continuing performance, taking remedial measures, or compensating for losses." When a fund manager breaches the contract, investors may claim compensation for losses. The adjudicating authority will determine the ultimate liability share - whether full or partial - based on factual evidence, the fund managers breach of contract, and the investors losses.
In Scenario 2, a key consideration is the dispute - resolution clause in the Private - Equity Fund Contract: "The parties agree that any disputes arising from or related to this contract shall be resolved through... If no agreement is reached through good - faith negotiations, all disputes arising from or related to this agreement shall be submitted to the [] Arbitration Commission for arbitration in accordance with the Commissions then - effective arbitration rules at the time of application." Typically, private - fund managers incorporate arbitration clauses in contracts to resolve disputes. Arbitration offers three key advantages: 1) Confidentiality - even if disputes arise between managers and investors with negative characteristics, such information remains undisclosed to third parties; 2) Higher costs - arbitration fees exceed litigation expenses, creating an additional barrier for investors initiating legal proceedings; 3) Procedural considerations - arbitration may place less emphasis on balancing social interests and protecting vulnerable groups compared to court proceedings.
- Case 3: The investor and the sales agency constitute a legal relationship of entrusted - financial - management contract, and the sales agency shall bear the liability for breach of contract if it violates the contract
In the real - world judicial practice, investors often not only demand the fund manager to be held responsible but also demand the sales agency that recommended the investor to buy the fund to be held responsible.
Holding sales agencies accoun not only helps investors circumvent unfavorable clauses in fund contracts - such as arbitration clauses in dispute resolution - but also allows them to choose entities with stronger compensation capabilities. Moreover, from an investors perspective, the notion that the person who introduced and recommended the fund bears corresponding responsibility aligns with their basic emotional understanding.
In the sales of some private funds, fund managers will entrust fund sales to fund - sales agencies for distribution. There is a commission relationship between fund managers and the sales agencies, but there is no written legal document between investors and the sales agencies.
According to Article 178 of the Civil Code, when two or more parties bear t liability in accordance with the law, the rights holder has the right to demand partial or full liability from the tly liable parties. Furthermore, as stipulated in Article 74 of the Minutes of the Ninth Civil Law Conference, if financial - product issuers or sellers fail to fulfill their suitability obligations, resulting in losses suffered by financial consumers during the purchase process, consumers may seek compensation from either the issuer or the seller. Additionally, pursuant to Article 167 of the General Provisions of the Civil Law, consumers may demand t and several liability for compensation from both the issuer and seller.
Although there is no written legal document confirming the relationship between investors and fund - sales institutions, the fund - sales institution essentially establishes a fiduciary legal relationship with the investor through its fund - recommendation activities. According to the aforementioned provisions, when the sales institution violates its obligations - specifically the suitability obligation to recommend fund products that match the investors risk assessment to qualified investors - the institution shall bear corresponding liabilities for such breach.
- A claim arising from pre - contractual fault
According to the "Minutes of the Ninth Civil and Commercial Trial Conference" and relevant judicial interpretations, the duty of suitability is explicitly defined as a pre - contractual obligation. Breach of this obligation may give rise to claims for pre - contractual fault. The responsible parties may include financial institutions such as fund managers, fund - sales agencies, and advisory units, which bear liability for pre - contractual fault under the aforementioned guidelines.
However, in the actual theory, there is still some controversy about whether the nature of the obligation of suitability is a legal obligation, a pre - contractual obligation or a contractual obligation, and there are also different views on the liability arising from the violation of the obligation of suitability.
The obligation of suitability is the focus of the current private - fund disputes, which will be discussed in detail in the next chapter. For the time being, it will be left aside.
- A claim arising from an infringement
From the standard sequence of claim retrieval, the priority of claims in tort actions is subordinate to contractual claims. Court - judgment data also shows that investors primarily file lawsuits for contractual breach. However, the specific choice of claim for rights protection still requires comprehensive judgment based on actual circumstances and evidence materials. Therefore, it remains necessary to understand the tort - damage - compensation claims in private - fund disputes.
Article 1165 of the Civil Code: If a person infringes upon the civil rights and interests of another person due to fault and causes damage, he shall bear tort liability.
As a tort action, the action for damages for infringement shall conform to the provisions of tort law on the constitutive elements of infringement. The constitutive elements of damages for infringement are: illegal act, damage fact, causal relationship, and subjective fault.
In the case of infringement, the infringing subject may be the fund manager, the sales agency, or even the fund trustee.
For the above - mentioned subjects, their tortious acts are different according to the subjects.
- The infringing acts of the fund manager: such as failure to invest, failure to disclose information, failure to file, etc.;
- The infringement of sales organizations: such as failure to fulfill the obligation of appropriateness, sales personnel recommending fund products in violation of regulations;
- The tortious acts of the fund trustee, such as negligence in supervision;
- Comparison between tort action and action for damages for breach of contract or pre - contractual fault
From the perspective of compensation scope, tort liability usually only covers direct property damage, but does not include indirect property damage (expected - benefit loss), while breach - of - contract liability covers all kinds of actual property damage. Several judgments have supported the fund manager to compensate investors for the principal, as well as the interest of bank deposits in the same period or even the expected income agreed in the fund contract.
Regarding the burden of proof, Article 75 of the "Minutes of the Ninth Civil Conference" stipulates that the burden should fall on financial institutions such as asset managers or sales agencies. However, doubts remain about whether this provision applies to tort - liability claims arising from entrusted - financial - management contracts. While some courts require asset managers to prove their own liability, others mandate investors to demonstrate the existence of fault.
However, the tort action still has its unique advantages: the fund trustee can be listed as the t tortfeasor and the t defendant.

II. Summary
Different claims require distinct legal foundations, imposing varying demands on investors and producing distinct legal consequences. When navigating private - fund disputes, parties must make pragmatic decisions based on actual circumstances. This article synthesizes key insights to create a "rights - protection roadmap" for investors, empowering them to adopt appropriate legal strategies tailored to specific situations.