What requirements must be met to establish a private equity fund?

Establishing a private equity fund is only possible when certain qualifications and structural requirements are met.

Under the Financial Investment Services and Capital Markets Act, requirements such as investor composition, operation structure, and registration must be met, and the following requirements need to be confirmed step by step for establishment.

(1) Operating entity (GP) requirements

The most important factor when establishing a private equity fund is the operating entity.

Generally, private equity funds have a structure where the GP (general partner) operates the fund, and the GP must be a corporation registered with the Financial Services Commission.

Of course, certain capital requirements must be met, and registration is possible only when all human and material requirements such as full-time operating personnel and internal control standards are met.

(2) Investor (LP) composition requirements

Since private equity funds are 'private,' there are restrictions on the number and qualifications of investors.

In principle, they consist of up to 100 final investors (up to 49 for solicitation to the general public), and general investors must be 'qualified investors' who have met the contribution requirement of at least 300 million won.

Since the level of regulation by financial authorities may vary depending on the investor composition, prior review is essential.

(3) Contribution and structural requirements

When establishing a private equity fund, a minimum contribution structure must be in place, and the articles of association (LPA) or contract specifying the rights and obligations between GP and LP must be clearly established.

A process of designing a legally safe revenue structure is needed, including investment purpose, asset operation method, and revenue distribution (waterfall) structure.

(4) Financial authority filing and registration procedures

Private equity fund establishment itself operates as a registration and post-reporting system rather than a license, but reporting obligations vary depending on the fund track chosen (general private equity fund or institutional-only private equity fund).

In particular, it is important to ensure legal completeness so that there are no defects in the financial authority reporting procedures conducted within 2 weeks of establishment.

If structural design or financial regulation review is needed, Daeryun Law Firm's Corporate Legal Affairs Group can support stable fund establishment through comprehensive legal advice including operational structure design, investor composition review, and response to financial authority regulations.