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:

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

1. Choice of Business Vehicle
2. The law of Limited Partnerships
Guiding Questions
- What are the advantages and
disadvantages of each business
vehicle?
 Geoffrey Morse, Partnerships and LLP
Law, in Partnership and LLP Law, 8th ed
(Oxford, UK: Oxford University Press, 2015)
(read pp 1–43 only).
 Geoffrey Morse, Limited
Partnerships, in Partnership and LLP, 8th ed
 - Why is limited partnership a
popular business vehicle in the
formation of venture capital (VC)
and private equity (PE) funds?
- Is there limited partnership in
your jurisdiction? If yes, how
does it work? If no, is there an
equivalent or similar business
vehicle?
- Does the legal structure of the
fund matter in fostering a robust
VC/PE market?
Week 3 Major legal issues relating to the
limited partnership
1. Legal personality (Entity
approach vs Aggregate
approach)
2. Partnership and outsiders
3. Partners and each other
4. The control rule
5. Dissolution of partnership
Guiding Questions
- Regarding the legal personality
of partnerships, which approach
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?
(Oxford, UK: Oxford University Press, 2015).
(read pp 299–313 only).
Singapore Study Team - Report of the Study
Team on Limited Partnerships (read section 7.1
and 8 only; skim the other parts).
 Lin Lin and HY Yeo, “Limited Partnership: A
New Business Vehicle in People's Republic of
China” (2010) 25(2) Butterworths Journal of
International Banking and Financial Law 104.
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.
Required readings:
 (Revisit) Singapore Study Team - Report of the
Study Team on Limited Partnerships (read the
whole document)
 Lin Lin, “Limited Partners’ Derivative Action:
Problem and Prospects in the Private Equity
Market of China” (2011) 41(2) Hong Kong Law
Journal 517.
 Institutional Limited Partner Association,
Principles, available at: https://ilpa.org/wp-
content/uploads/2018/02/ILPA-Private-Equity-
Principles-version-2.pdf
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
agency problem and
opportunistic behavior of general
partners?
- What is the key to VC
contracting in the US VC
market?
- Does the reputation mechanism
work in your country’s VC
market?
Week 6 Venture Capital Exits
1. VC Exits
2. Dual-class stocks
Guiding Questions:
- What makes convertible
preference shares and the dual-
class stock structure so attractive
in the VC market?
- Does your country recognize
dual-class stock structure? Why
or why not? If not, do you think
your country should introduce the
dual-class stock structure?
- What is the relationship between
the VC market and the stock
market?
- Evaluate your country’s VC
market. Are there any legal
problems relating to VC exits?
Why?
- What is the role of law and
government in facilitating VC
exits?
Linking Governance with Regulatory
Policy (UK: Ashgate, 2001).
 David Rosenberg, “Venture Capital Limited
Partnerships: A Study in Freedom of Contract”
(2002) Columbia Business Law Review 363.
Background readings:
 Kate Litvak, “Monte Carlo Simulation of
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
Required readings:
 Lin Lin, "Venture Capital Exits and the Structure
of Stock Markets: Lessons from China" (2017)
12 Asian Journal of Comparative Law 1.
 Bernard S Black & Ronald J Gilson, “Does
Venture Capital Require an Active Stock
Market?” (1999) 11 Journal of Applied Corporate
Finance 37.
 Ronald J Gilson, “Evaluating Dual Class
Common Stock: The Relevance of Substitutes”
(1987) 73 Virginia Law Review 807.
 Michael Klausner & Stephen
Vanuto, “Liquidation Rights and Incentive
Misalignment in Start-up Financing” (2013) 98
Cornell Law Review 1399.
Background readings:
Michelle Dy, “The Future of a Dual-Class Shares
Structure in Singapore” (2016) Centre for
Banking & Finance Law, Faculty of Law,
National University of Singapore, August 2016,
report number CBFL-Rep-MD2.
 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
FinTech
1. Risks and Regulation of
crowdfunding
2. Risks and Regulation of
crowdfunding ICOs
3. FinTech regulation
Guiding Questions:
- In what way is equity
crowdfunding or ICOs different
from initial public offerings
(IPOs)?
- What are the main advantages of
equity crowdfunding/ICOs
as opposed to IPOs or raising
funds?
- What are the key risks
associated with equity
crowdfunding/ICOs and how
should we mitigate those risks?
- How should the FinTech sector
be regulated?
- Do you think ICOs will replace
VC?
- What should be the regulatory
approach to ICOs?
Week 8 Private equity (Part 1)
15 Mar
1. How does PE work?
2. Regulation of PE
3. Problems within PE markets
Guiding Questions:
- Do we need to regulate private
equity, and if so, how?
- What do you think of the
regulatory framework for private
equity in your jurisdiction?
- Is there any typical problem in
the PE market in your country?
Required readings:
 Lin Lin, “Managing the Risks of Equity
Crowdfunding: Lessons from China” (2017)
17(2) Journal of Corporate Law Studies 1.
 Lin Lin, Venture Capital in the Rise of
Crypto Economy (working paper)
 "The law and practice of Fintech in
Singapore", in JD Finance Research Centre
ed., Global Fintech Report 2018: Industry
Development and Legal Frontier, (Law Press
China, 2018) forthcoming
 John Armour & Luca Enriques, “The
Promise and Perils of Crowdfunding:
Between Corporate Finance and Consumer
Contracts” (2018) 81 The Modern Law
Review 51.
Background readings:
 Christian Hofmann, “An Easy Start for Start-
ups: Crowdfunding Regulation in Singapore”
(2018) Berkeley Business Law Journal
 MAS Facilitating Securities-Based
Crowdfunding (2015) (last visited Mar 4,
2018).
Required readings:
 Jennifer Payne, “Private Equity and its
Regulation in Europe” (2011) European Business
Organization Law Review 559.
 William Wilson Bratton, “Private Equity 's Three
Lessons for Agency Theory” (2008) 3 Brooklyn
Journal of Corporate Finance & Commercial Law
1.
 Michael D Klausner, “Institutional Shareholders,
Private Equity, and Antitakeover Protection at the
IPO Stage” (2003) 152 University of
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.

Week 9 Private equity (Part 2)
(Possible guest speaker)
- Private Equity market vs Public
market
- Private equity secondary market
- Private equity in Singapore
- Foreign Investment in China’s
PE Market
Guiding Questions
- How do private equity markets
differ from public equity
markets?
- What is VAM?
- Is there a need for VAM? Why or
why not?
 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)
Required readings:
 Yong Kwek Ping, Private Equity in
China, in Private Equity in China: Challenges and
Opportunities (2012) (available on IVLE)
 Yong Kwek Ping, Private Equity in
China, in Private Equity in China: Challenges and
Opportunities (2012). Page 114-121 on VAM
(available on IVLE)
 Lee Harris, “A Critical Theory of Private Equity”
(2010) 35 Delaware Journal of Corporate Law
259.
 Lin Lin, “Private Equity and Venture Capital in
Singapore” in Hans Tjio, Dora Neo and Lan Luh
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
).

Week 10 VC and PE in China
1. VC/PE markets in China
2. Internal governance of PE funds
in China
3. LP activism in China
Guiding Questions
- What are the special features of
China's PE market?
- What elements are missing in
China’s PE market as compared
to its US counterpart?
- What are the typical internal
problems within a Chinese
private equity fund? What are
the possible solutions to this
problem?
- What are the reasons for LP
activism in Chinese private
equity funds?
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).
Required readings:
 Lin Lin, "Private Equity Investor Protection:
Conceptualizing Duties of General Partners In
China" (2018) 15 (1) Berkeley Business Law
Journal, pp 43-91
 (revisit) Lin Lin, Engineering a Venture Capital
Market: Lessons from China (2017) 30(1)
Columbia Journal of Asian Law 160.
 Lin Lin, “The Private Equity Limited Partnership
in China: A Critical Evaluation of Active Limited
Partners” (2013) 13(1) Journal of Corporate Law
Studies 185.
 Clifford Chance, Chinese Courts Rule on Value
Adjustment Mechanism – Impact on PE
Investments (2013). (available on IVLE)
Background readings:

Week 11 REITs
1. Introduction of REITs
2. Regulation of REITs
3. REITs and Business Trusts
4. Corporate governance of REITs
5. REITS in Singapore
Proposed Guiding Questions
- Which organizational form
prevails in the context of REITs?
Corporation or trust? Why?
- Is there REITs or equivalent in
your country? Why or why not?
- Do we need to further develop
the REITs market? Why?
- How far should we regulate
REITs?
 Lawrence Zhan Zhang, “The Legal Environment
For Foreign Private Equity Firms In China”
(2011) 16 Fordham J Corp & Fin L 839.
Required readings:
 Code on Collective Investment Schemes, Cap
1-7 & Appendix 6, (1 January 2018)
 MAS, Response To Feedback Received –
Consultation On Enhancements To The
Regulatory Regime Governing REITs And
REITs Managers (2015) (last visited Mar 4,
2018).
 Suet Fern Lee & Linda Esther Foo, “Real
Estate Investment Trusts in Singapore - Recent
Legal and Regulatory Developments and the
Case for Corporatisation” (2010) 22 Singapore
Academy of Law Journal 36.
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

Week 12 Hedge Fund Governance and
Activism
1. Governance in hedge funds
2. Hedge fund activism
Guiding Questions
- Contrast shareholder activism
with hedge fund activism. What
are the problems created by
hedge fund activism?
- How should we regulate the
hedge funds market?
- Contrast private equity funds
with hedge funds. How far
should we regulate hedge
funds?
 Appendix 5: Draft Amendments to the Code
on Collective Investment Schemes

Required readings:
 Eilís Ferran, “After the Crisis: The Regulation of
Hedge Funds and Private Equity in the EU”
(2011) 12(3) European Business Organization
Law Review 379.
 William W Bratton, “Hedge Funds and
Governance Targets” (2007) 95 The Georgetown
Law Journal 1375.
 Brian R Cheffins and John Armour, “The Past,
Present and Future of Shareholder Activism by
Hedge Funds” (2011) 37 Journal of Corporation
Law 51.
 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.