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ALTERNATIVE INVESTMENTS

2018-2019 (Semester 2)
Dr. Lin Lin
Assistant Professor
Faculty of Law
National University of Singapore

LESSON PLAN AND READING GUIDE

Draft as of 7 Jan 2019

Dates Topics and Guiding Questions Readings

Week 1 Introduction Required readings:


 Louise Gullifer & Jennifer Payne, Private
1. Course overview Equity, in Corporate Finance Law: Principles and
2. Introduction to alternative Policy, 2nd ed (London, UK: Hart Publishing,
investments 2015) (read pp 654-663 only).
3. Different types of alternative
investments  Josh Lerner, Felda Hardymon & Ann
Leamon, Private Equity Today and Tomorrow:
Guiding Questions Introduction to Venture Capital and Private
- What is alternative investment? equity: Casebook, in Venture Capital and
- What are the distinctions between Private Equity: A Casebook (4th ed. 2008)
alternative investments and (HG4963 Ler 2012). (read pp 1-6 only).
traditional investments?
- What are alternative investment  Read the homepage of the Alternative Investment
vehicles? Department at HSBC:
- What are the distinctions between https://www.hsbcprivatebank.com/en/invest/alter
alternative investment vehicles and native-investments
alternative business vehicles?
 Vanguard Guide on What Alternative
Investments are, available at:
https://institutional.vanguard.com/iwe/pdf/FAEG
AIB.pdf

Background readings:
 Hans Tjio, Alternative Business Forms, in Hans
Tjio, Pey Woan Lee & Pearlie Koh eds,
Corporate Law (Singapore: Academy Publishing,
2015) (KE5109.2 Tji 2015).

Week 2 Limited Partnership Required readings:


 Geoffrey Morse, Partnerships and LLP
1. Choice of Business Vehicle Law, in Partnership and LLP Law, 8th ed
2. The law of Limited Partnerships (Oxford, UK: Oxford University Press, 2015)
(read pp 1–43 only).
Guiding Questions
- What are the advantages and  Geoffrey Morse, Limited
disadvantages of each business Partnerships, in Partnership and LLP, 8th ed
vehicle?
- Why is limited partnership a (Oxford, UK: Oxford University Press, 2015).
popular business vehicle in the (read pp 299–313 only).
formation of venture capital (VC)
and private equity (PE) funds? Singapore Study Team - Report of the Study
- Is there limited partnership in Team on Limited Partnerships (read section 7.1
your jurisdiction? If yes, how and 8 only; skim the other parts).
does it work? If no, is there an
equivalent or similar business  Lin Lin and HY Yeo, “Limited Partnership: A
vehicle? New Business Vehicle in People's Republic of
- Does the legal structure of the China” (2010) 25(2) Butterworths Journal of
fund matter in fostering a robust International Banking and Financial Law 104.
VC/PE market?
Background readings:
 Lin Lin, “The Evolution of Partnerships in China
from the Perspective of Asset Partitioning”
(2013) (2) Stanford Journal of Law, Business and
Finance 215.

 Lin Lin, “Limited Liability Partnership in China


- A Long Way Forward” (2010) 7 International
Company and Commercial Law Review 259.

 Joseph A Mccahery & Erik PM


Vermeulen, “Limited Partnership Reform in the
United Kingdom: A Competitive, Venture Capital
Oriented Business Form” (2004) 5(1) European
Business Organization Law Review 61.

Week 3 Major legal issues relating to the Required readings:


limited partnership  (Revisit) Singapore Study Team - Report of the
Study Team on Limited Partnerships (read the
1. Legal personality (Entity whole document)
approach vs Aggregate
approach)  Lin Lin, “Limited Partners’ Derivative Action:
2. Partnership and outsiders Problem and Prospects in the Private Equity
3. Partners and each other Market of China” (2011) 41(2) Hong Kong Law
4. The control rule Journal 517.
5. Dissolution of partnership
 Institutional Limited Partner Association,
Guiding Questions Principles, available at: https://ilpa.org/wp-
- Regarding the legal personality content/uploads/2018/02/ILPA-Private-Equity-
of partnerships, which approach Principles-version-2.pdf
to you prefer? Why?
- What do you think of the
function of the control rule?
Should it be abolished?
- Is there any problem with the
limited partnership regime in
your jurisdiction?
Week 4 Engineering a Venture Capital Required readings:
Market  Lin Lin, Engineering a Venture Capital Market:
Lessons from China (2017) 30(1) Columbia
1. History and the Silicon Valley Journal of Asian Law 160.
ecosystem
2. How venture capital works  Ronald J Gilson, “Engineering Venture Capital
3. Venture capital vs. public market Markets: Lessons from the American
4. Engineering a venture capital Experience” (2003) 55 Stanford Law Review
market 1067.
5. The simultaneity problem
 "Venture Capital in Singapore: The Way
Guiding Questions: Forward" Journal of Business Law (forthcoming,
- How does the venture capital 2019)
market differ from the public
market? Background readings:
- Did the US government help to  Ronald J Gilson, “Understanding the Choice
establish a VC market? Or did it Between Public and Private Equity Financing of
develop on its own? Early Stage Companies: A Comment on Barry &
- What are the typical agency Turki” (1998) 2 The Journal of Small &
problems in a venture capital Emerging Business Law 123.
cycle?  Douglas Cumming and Sofia A. Johan eds,
- Have government programs to Venture Capital and Private Equity Contracting:
engineer venture capital markets An International Perspective, Chapter 9
been successful? Why and why
not?
- What is the role of the
government/law in the
development of Chinese venture
capital markets?
- How do we balance government
intervention and market forces
when engineering a national
venture capital market?
- Are there any lessons that can be
offered by China, Singapore, or
US to other countries which are
looking to develop a national VC
market?

Week 5 Venture Capital Contracting Required readings:


 Ronald J Gilson, “Engineering Venture Capital
1. Legal documents in VC Markets: Lessons from the American
contracting Experience” (2003) 55 Stanford Law Review
2. Key terms in VC contracts 1067 (revisit Part II only)

Guiding Questions:  Michael D Klausner & Kate Litvak, “What


- What are the key terms used in Economists Have Taught Us About Venture
VC/PE Limited Partnership Capital Contracting” in M. Whincop, ed,
Agreements? What are their Bridging the Entrepreneurial Financing Gap:
functions?
- Does private ordering alone limit Linking Governance with Regulatory
agency problem and Policy (UK: Ashgate, 2001).
opportunistic behavior of general
partners?  David Rosenberg, “Venture Capital Limited
- What is the key to VC Partnerships: A Study in Freedom of Contract”
contracting in the US VC (2002) Columbia Business Law Review 363.
market?
- Does the reputation mechanism Background readings:
work in your country’s VC  Kate Litvak, “Monte Carlo Simulation of
market? Contractual Provisions: An Application to
Default Provisions in Venture Capital Limited
Partnership Agreements” (2013) 98 Cornell Law
Review 1495

 Kate Litvak, “Venture Capital Limited


Partnership Agreements: Understanding
Compensation Arrangements” (2004) SSRN
Electronic Journal.

 Douglas Cumming and Sofia A. Johan eds,


Venture Capital and Private Equity Contracting:
An International Perspective, Chapter 12

Week 6 Venture Capital Exits Required readings:


 Lin Lin, "Venture Capital Exits and the Structure
1. VC Exits of Stock Markets: Lessons from China" (2017)
2. Dual-class stocks 12 Asian Journal of Comparative Law 1.

 Bernard S Black & Ronald J Gilson, “Does


Guiding Questions: Venture Capital Require an Active Stock
- What makes convertible Market?” (1999) 11 Journal of Applied Corporate
preference shares and the dual- Finance 37.
class stock structure so attractive
in the VC market?  Ronald J Gilson, “Evaluating Dual Class
Common Stock: The Relevance of Substitutes”
- Does your country recognize (1987) 73 Virginia Law Review 807.
dual-class stock structure? Why
or why not? If not, do you think  Michael Klausner & Stephen
your country should introduce the Vanuto, “Liquidation Rights and Incentive
dual-class stock structure? Misalignment in Start-up Financing” (2013) 98
- What is the relationship between Cornell Law Review 1399.
the VC market and the stock
market? Background readings:
- Evaluate your country’s VC Michelle Dy, “The Future of a Dual-Class Shares
market. Are there any legal Structure in Singapore” (2016) Centre for
problems relating to VC exits? Banking & Finance Law, Faculty of Law,
Why? National University of Singapore, August 2016,
- What is the role of law and report number CBFL-Rep-MD2.
government in facilitating VC
exits?  Consultation Paper published by SGX on the
DCS structure:
https://www.rajahtannasia.com/media/2716/sgx_
dcs_consultation_paper_-sgx_20170216-final.pdf

 SGX’s Responses to Consultation Paper:


http://www.sgx.com/wps/wcm/connect/1f8bc246
-b188-49c6-836c-
a174aa3eec75/Responses+to+Feedback+on+DCS
+Consultation+Paper.pdf?MOD=AJPERES&Co
ntentCache=NONE&CACHEID=1f8bc246-
b188-49c6-836c-a174aa3eec75

 Hong Kong Stock Exchange Launches New


Rules for Dual Class and Biotech Listings,
available at:
https://webcache.googleusercontent.com/search?
q=cache:jjwHnKfxXewJ:https://www.davispolk.
com/files/2018-04-
25_hk_stock_exchange_launches_new_rules_dua
l_class_biotech_listings.pdf+&cd=10&hl=en&ct
=clnk&gl=sg&client=firefox-b

 Ronald J Gilson & David M.


Schizer, “Understanding Venture Capital
Structure: A Tax Explanation for Convertible
Preferred Stock” (2003) 116(3) Harvard Law
Review 874.

 Bernard S Black & Ronald J Gilson “Venture


Capital and the Structure of Capital Markets:
Banks Versus Stock Markets” (1998) 47 Journal
of Financial Economics 243 (1998).

 John Armour, “Personal Insolvency Law and the


Demand for Venture Capital” (2004) 5 European
Business Organization Law Review 87.

 D Gordon Smith, “The Exit Structure Of Venture


Capital” (2005) 53 UCLA Law Review 315 .
Week 7 Crowdfunding, Crypto and Required readings:
FinTech  Lin Lin, “Managing the Risks of Equity
Crowdfunding: Lessons from China” (2017)
1. Risks and Regulation of 17(2) Journal of Corporate Law Studies 1.
crowdfunding
2. Risks and Regulation of  Lin Lin, Venture Capital in the Rise of
crowdfunding ICOs Crypto Economy (working paper)
3. FinTech regulation
 "The law and practice of Fintech in
Guiding Questions: Singapore", in JD Finance Research Centre
- In what way is equity ed., Global Fintech Report 2018: Industry
crowdfunding or ICOs different Development and Legal Frontier, (Law Press
from initial public offerings China, 2018) forthcoming
(IPOs)?
- What are the main advantages of  John Armour & Luca Enriques, “The
equity crowdfunding/ICOs Promise and Perils of Crowdfunding:
as opposed to IPOs or raising Between Corporate Finance and Consumer
funds? Contracts” (2018) 81 The Modern Law
- What are the key risks Review 51.
associated with equity
crowdfunding/ICOs and how Background readings:
should we mitigate those risks?  Christian Hofmann, “An Easy Start for Start-
- How should the FinTech sector ups: Crowdfunding Regulation in Singapore”
be regulated? (2018) Berkeley Business Law Journal
- Do you think ICOs will replace
VC?  MAS Facilitating Securities-Based
- What should be the regulatory Crowdfunding (2015) (last visited Mar 4,
approach to ICOs? 2018).

Week 8 Private equity (Part 1) Required readings:


15 Mar  Jennifer Payne, “Private Equity and its
1. How does PE work? Regulation in Europe” (2011) European Business
2. Regulation of PE Organization Law Review 559.
3. Problems within PE markets
 William Wilson Bratton, “Private Equity 's Three
Guiding Questions: Lessons for Agency Theory” (2008) 3 Brooklyn
- Do we need to regulate private Journal of Corporate Finance & Commercial Law
equity, and if so, how? 1.
- What do you think of the
regulatory framework for private  Michael D Klausner, “Institutional Shareholders,
equity in your jurisdiction? Private Equity, and Antitakeover Protection at the
- Is there any typical problem in IPO Stage” (2003) 152 University of
the PE market in your country? Pennsylvania Law Review 755

Background readings:
 Louise Gullifer & Jennifer Payne, Corporate
Finance Law: Principles and Policy, 2nd ed
(London, UK: Hart Publishing, 2015) at 654–694.
 IOSCO Technical Committee, Private Equity
Conflicts of Interest Consultation Report (2009)
(last visited Mar 4, 2018).

 Brian R Cheffins & John Armour “The Eclipse of


Private Equity” (2007) ECGI - Law Working
Paper No. 082/2007.

 FSA Discussion Paper 06/6, Private Equity: A


Discussion of Risk and Regulatory Engagement.

 Walker, Disclosure and Transparency in Private


Equity Consultation Paper (July 2007).

 UK House of Commons Treasury Committee,


Private Equity (Tenth Report of Session 2006-
07) (2007) (last visited Mar 4, 2018)

 Stephen L Ritchie, The Private Equity Review,


3rd Ed, (London, UK: Law Business Research,
2014), (last visited Mar 4, 2018).

 Casey Cogut & Simpson Thacher & Bartlett


LLP, Private Equity in 32 jurisdictions
worldwide (London, UK: Law Business
Research, 2013) (last visited Mar 4, 2018)

Week 9 Private equity (Part 2) Required readings:


(Possible guest speaker)  Yong Kwek Ping, Private Equity in
China, in Private Equity in China: Challenges and
- Private Equity market vs Public Opportunities (2012) (available on IVLE)
market
- Private equity secondary market  Yong Kwek Ping, Private Equity in
- Private equity in Singapore China, in Private Equity in China: Challenges and
- Foreign Investment in China’s Opportunities (2012). Page 114-121 on VAM
PE Market (available on IVLE)

Guiding Questions  Lee Harris, “A Critical Theory of Private Equity”


- How do private equity markets (2010) 35 Delaware Journal of Corporate Law
differ from public equity 259.
markets?
- What is VAM?  Lin Lin, “Private Equity and Venture Capital in
- Is there a need for VAM? Why or Singapore” in Hans Tjio, Dora Neo and Lan Luh
why not? Luh eds., Handbook on Financial Services Law
and Regulation in Singapore (Academy
Publishing, forthcoming 2018) (available at my
researchgate homepage:
https://www.researchgate.net/profile/Lin_Lin136
).
Background readings:
 De Brauw Blackstone Westbroek et al., RMB
denominated funds for foreign private equity
investment in China, Lexology, June 1, 2011.
(available on IVLE)

 Lawrence Zhan Zhang, “The Legal Environment


For Foreign Private Equity
Firms In China” (2011) 16 Fordham J Corp &
Fin L 839 Notes on the valuation adjustment
mechanism (VAM) in China (available on IVLE)

 John Armour and Brian Cheffins, “The Eclipse


of Private Equity” (2008) 33(1) Delaware
Journal of Corporate Law 1.

 Evan Zhang, James Yong WANG & Shang


Xiang, Summary of new Interim Measures on
Private Equity Investment
Funds Lexology (2014).

 Dean Collins, Hailin Cui & Karl Gao, A New


Era for Private Funds in China?, Private Equity
Newsletter, February 4, 2015.

 Ernst & Young, Private Equity Roundup -


China (2014).

Week 10 VC and PE in China Required readings:


 Lin Lin, "Private Equity Investor Protection:
1. VC/PE markets in China Conceptualizing Duties of General Partners In
2. Internal governance of PE funds China" (2018) 15 (1) Berkeley Business Law
in China Journal, pp 43-91
3. LP activism in China
 (revisit) Lin Lin, Engineering a Venture Capital
Guiding Questions Market: Lessons from China (2017) 30(1)
- What are the special features of Columbia Journal of Asian Law 160.
China's PE market?
- What elements are missing in  Lin Lin, “The Private Equity Limited Partnership
China’s PE market as compared in China: A Critical Evaluation of Active Limited
to its US counterpart? Partners” (2013) 13(1) Journal of Corporate Law
- What are the typical internal Studies 185.
problems within a Chinese
private equity fund? What are  Clifford Chance, Chinese Courts Rule on Value
the possible solutions to this Adjustment Mechanism – Impact on PE
problem? Investments (2013). (available on IVLE)
- What are the reasons for LP
activism in Chinese private Background readings:
equity funds?
 Lawrence Zhan Zhang, “The Legal Environment
For Foreign Private Equity Firms In China”
(2011) 16 Fordham J Corp & Fin L 839.

Week 11 REITs Required readings:


1. Introduction of REITs  Code on Collective Investment Schemes, Cap
2. Regulation of REITs 1-7 & Appendix 6, (1 January 2018)
3. REITs and Business Trusts
4. Corporate governance of REITs  MAS, Response To Feedback Received –
5. REITS in Singapore Consultation On Enhancements To The
Regulatory Regime Governing REITs And
Proposed Guiding Questions REITs Managers (2015) (last visited Mar 4,
- Which organizational form 2018).
prevails in the context of REITs?
Corporation or trust? Why?  Suet Fern Lee & Linda Esther Foo, “Real
- Is there REITs or equivalent in Estate Investment Trusts in Singapore - Recent
your country? Why or why not? Legal and Regulatory Developments and the
- Do we need to further develop Case for Corporatisation” (2010) 22 Singapore
the REITs market? Why? Academy of Law Journal 36.
- How far should we regulate
REITs? Background readings:
 Business Trusts Act (Cap 31A)

 Business Trusts Regulations

 Hang Wu Tang, “The Resurgence of


‘Uncorporation’: The Business trust in
Singapore” (2012) Journal of Business Law
683.

 Ernst & Yang, Private Equity Roundup -


China (2014) (last visited Mar 4, 2018).

 Oliver Farnworth, REITs in China, A Plus,


2009, at 42-44 (last visited Mar 4, 2018).

 Appendix 1: Draft Amendments To The


Securities And Futures Act (Cap. 289)

 Appendix 2: Draft Amendments To


Securities And Futures (Licensing And
Conduct Of Business) Regulations (Cap. 289,
RG 10)

 Appendix 3: Draft Notice to All Holders of a


Capital Markets Services License for Real
Estate Investment Trust Management

 Appendix 4: Draft Guidelines to All Holders


Of A Capital Markets Services Licence For
Real Estate Investment Trust Management
 Appendix 5: Draft Amendments to the Code
on Collective Investment Schemes

Week 12 Hedge Fund Governance and Required readings:
Activism  Eilís Ferran, “After the Crisis: The Regulation of
1. Governance in hedge funds Hedge Funds and Private Equity in the EU”
2. Hedge fund activism (2011) 12(3) European Business Organization
Law Review 379.
Guiding Questions
- Contrast shareholder activism  William W Bratton, “Hedge Funds and
with hedge fund activism. What Governance Targets” (2007) 95 The Georgetown
are the problems created by Law Journal 1375.
hedge fund activism?
- How should we regulate the  Brian R Cheffins and John Armour, “The Past,
hedge funds market? Present and Future of Shareholder Activism by
- Contrast private equity funds Hedge Funds” (2011) 37 Journal of Corporation
with hedge funds. How far Law 51.
should we regulate hedge
funds?  William Bratton, “Hedge Fund Activism, Poison
Pills, and the Jurisprudence of Threat” in William
Savitt, Steven Davidoff Solomon, Randall
Thomas, eds, Corporate Contract in Changing
Times: Is the Law Keeping Up? (forthcoming).

Background readings:
 John Armour and Brian Cheffins, “The Rise and
Fall (?) of Shareholder Activism by Hedge
Funds” (2012) 14(3) Journal of Alternative
Investments 17.

 OECD, The Implications of alternative


investment vehicles for corporate governance: a
synthesis of research about private equity firms
and “activist hedge funds", OECD Steering
Group on Corporate Governance 16–23 (2007)
(last visited Mar 4, 2018).

 White Ying & Ge Yin, Hedge Funds in China,


Eurekahedge.com (2012) (last visited Mar 4,
2018).

 Thomas W Briggs, “Corporate Governance and


the New Hedge Fund Activism: An Empirical
Analysis” (2018) 32 Journal of Corporation
Law 682.