[Direct answer]They should be held accountable. Promising investors guaranteed returns and principal protection during the promotion of private equity funds is a behavior explicitly prohibited by laws and regulations. The parties making such promises may face responsibilities on three levels: administrative, civil, and criminal. According to Article 15 of the Interim Measures for the Supervision and Administration of Private Equity Investment Funds (implemented on August 21, 2014), private equity fund managers and sales agencies are prohibited from promising investors that their principal will not be lost or guaranteeing minimum returns; nor are expressions such as "guaranteed returns" and "fixed income" allowed in promotional materials. At the civil level, guarantee promises are usually deemed invalid if they violate regulatory mandatory provisions. If investors claim payment according to the promises, courts often apportion losses based on the parties' respective faults; if there is public promotion and profit guarantees during the fundraising process and funds are raised from unspecified individuals, it may also constitute the crime of illegally absorbing public deposits, subject to criminal prosecution according to Article 176 of the Criminal Law of the People's Republic of China (amended on December 29, 2023). Investors should preserve promotional evidence, assert their rights in a timely manner, and seek legal advice when necessary.\nCross-border financeColumn.

I. Problem Background and Typical Scenarios

Such disputes often arise in several situations: First, sales personnel verbally promise "guaranteed principal and interest" and "rigid redemption at maturity" on WeChat, by phone, or at roadshows; Second, promotional materials state phrases such as "fixed expected return", "make up the difference", and "safe and stable"; Third, managers and investors sign individual guarantee letters and make-up agreements; Fourth, fund sales personnel privately promise to cover losses in their own names; Fifth, the product uses the structure of "nominal equity and actual debt" and "fixed return + repurchase" to disguise the lock-in of returns; Sixth, after the product fails to redeem on time, investors realize the gap between the original promotion and the risk disclosure. When handling similar cases in Beijing, the court usually first reviews the evidence from the fundraising stage to determine whether the promised guaranteed returns are valid and enforceable. For matters involving the compliance of financial institutions, reference can be made to relevant regulatory provisions.Business and contract disputes in enterprisesColumn.

II. Key points of contention

First, whether the guarantee commitment is valid. Oral commitments often rely on chat records, audio recordings, and promotional materials for evidence, and providing proof is a common weakness. Second, the effectiveness of the guarantee clause. In judicial practice, many courts determine that guarantee-of-return clauses that violate regulatory provisions are invalid. However, individual rulings hold that management commitments made unilaterally by managers should be interpreted according to their true intent, and the judicial interpretations are not entirely consistent. Third, who is the subject of the commitment. The liability attribution for institutional commitments and individual employee commitments is different, and the determination of employee's official conduct is often a point of contention. Fourth, the investor's own faults, such as the confirmation of qualified investors and the signing of risk disclosure documents, will affect the proportion of loss sharing. Fifth, how to calculate the losses, including the principal, agreed returns, and actual settlements. Sixth, whether it involves illegal fund-raising, and the procedural choices when it crosses over into criminal and civil law. Specific determinations should be based on current effective laws and regulations and judicial rulings. For issues involving fund recovery and enforcement, reference can be made to relevant provisions.Creditor's rights and debts, and enforcement casesColumn.

III. Professional analysis by Henglue Lawyers

Based on the practical experience of lawyers from our firm in handling private equity fund repayment disputes, the key to the success or failure of cases involving guaranteed returns lies in the preservation of evidence during the fundraising process. Common scenarios include: salespersons using phrases such as "all past products have been fully repaid" and "this product offers internal interest rate subsidies" to persuade investors, then using oral promises without evidence to defend against claims; promotional materials mentioning "expected returns" but pairing them with historical repayment charts to create substantial misleading; and managers delaying repayment by issuing extension announcements at maturity, attempting to buy time with delay tactics. Lawyers from our firm advise investors to focus on three key points: First, thoroughly preserve promotional materials, brochures, chat records, audio recordings, and transfer receipts to prove the fact of guaranteed returns; Second, distinguish between contractual provisions and promotional practices. Even if the contract states "no principal protection," if there were strict repayment guarantees during the promotion process, investors can still hold the sales agency accountable for unlawful promotion; Third, be vigilant against suing only sales personnel while neglecting the liability chain involving managers, sales agencies, and actual fund users, as the choice of responsible parties directly affects the likelihood of recovering funds. Other pitfalls to avoid include: signing a risk disclosure document does not necessarily exempt salespersons from their obligation to conduct appropriate and compliant promotions; waiting too long to claim repayment may result in missing the statute of limitations and losing the opportunity for property preservation. For an overall strategy on investor protection, please refer to the following document:Special services and other casesColumn.

IV. Practical suggestions and legal basis

Action recommendations: First, immediately secure evidence from the fundraising process, and have the promotional materials, chat records, and audio recordings of the commitment rhetoric notarized or backed up in the cloud. Second, organize the investment transaction records, contracts, share confirmation documents, and extension agreements, and calculate the principal and unpaid amounts. Third, pursue legal remedies through different channels: - File a civil lawsuit against the fund manager or sales agent to claim damages for negligence; - Submit complaints and reports to securities regulatory authorities and the Fund Industry Association; - Report suspected illegal fundraising activities to public security authorities. Fourth, if you discover the other party holds assets such as real estate or bank accounts, promptly apply for property preservation orders. Fifth, be aware of the three-year statute of limitations, which begins from the date you or should have known of the infringement of your rights. Legal basis: - Article 15 of the Interim Measures for the Supervision and Administration of Private Equity Investment Funds prohibits guarantees of principal and returns. - The Private Equity Investment Fund Supervision and Administration Regulations (effective September 1, 2023) further strengthen supervision and legal responsibilities in the fundraising process. - Article 153, Article 157, and Article 176 of the Civil Code of the People's Republic of China (effective January 1, 2021) stipulate that civil legal acts violating mandatory provisions are invalid and require property restitution and compensation for negligence, respectively. - Article 176 of the Criminal Law of the People's Republic of China regulates the crime of illegally absorbing public deposits.

5. Henglu Law Firm's Reminder

Risk Warning: Firstly, the promise of "guaranteed principal and yield" is itself illegal. Investors should not relax their due diligence judgment on the product and the entity just because of such a promise. Secondly, the invalidity of the guaranteed minimum clause does not mean that the investment funds will be completely lost. Investors can claim corresponding compensation from the salesperson and the manager according to the principle of fault liability. Thirdly, oral promises must be transformed into evidence that can be submitted. Chat records should not be deleted, and the testimonies of departed sales staff should be fixed as soon as possible. Fourthly, be vigilant against secondary exploitation. Schemes that delay payment under the guise of "restructuring" or "transferring to new shares" often lead to greater losses. It is recommended to entrust professional lawyers as soon as possible to evaluate the claim path and preservation timing, and to seek advice when necessary.Beijing Henglu Law FirmCheck the similar columns on the official website and seize the opportunity to protect your rights.

VI. Frequently Asked Questions

Q1: Are the provisions promising guaranteed returns valid during the promotion period?

It is generally invalid. According to Article 15 of the Interim Measures for the Supervision and Administration of Private Equity Investment Funds, managers and sales agencies are not allowed to promise guaranteed principal and returns. Such guarantee arrangements violate mandatory regulatory provisions, and judicial practice often deems them invalid according to Article 153. However, the invalidity of the clause does not mean that there is no way to protect rights. Investors can claim that the sales parties and managers committed violations in the fundraising process, and according to Article 157 of the Civil Code, they shall bear compensation liabilities according to the degree of fault and recover some losses.

Q2: What evidence do I need to prepare to prove that the other party promised a guaranteed return?

The core evidence includes: firstly, promotional materials, such as brochures, roadshow PPTs, and screenshots of WeChat Moments containing terms like "guaranteed return", "fixed income", and "difference compensation"; secondly, sales commitment records, including conversations promising guaranteed returns or full compensation via WeChat, text messages, emails, and audio recordings; thirdly, signed documents, including contracts, risk disclosure letters, and qualified investor confirmation forms; fourthly, fund-related evidence, such as transfer records, share confirmation slips, and dividend receipt records; and fifthly, extension announcements and communication records following delayed payouts. The more complete the evidence is, the higher the likelihood of establishing the facts of the commitment and identifying the other party's fault.

Q3: Can I recover all the principal and profits after filing a lawsuit?

This cannot be generalized. The guarantee clause is usually deemed invalid, and the agreed upon returns are generally difficult to fully support; courts often apportion losses based on the fault of both parties. If the seller engages in obvious illegal promotion, investors can seek compensation for the principal and most of the losses. If the investor fails to conduct a qualified investor review or invest imprudently, they may also bear some of the losses themselves. The actual repayment also depends on the other party's solvency and the effectiveness of the preservation measures. It is recommended to have rational expectations and focus on obtaining fixed evidence, identifying the responsible parties, and taking timely preservation measures.

Q4: How long does it take to litigate to protect the rights of private equity funds?

The first-instance ordinary procedure generally takes no more than six months, and the second-instance procedure takes about three months. However, cases involving the intersection of criminal and civil litigation, numerous parties, or service by public announcement will take longer. If you file a complaint or report first or wait for the results of the criminal proceedings, the timeframe will be significantly extended. Property preservation can be initiated before or during the litigation process. Early investigation and control of the other party's assets will greatly affect the final recovery of funds. It is recommended to initiate the process as soon as possible to avoid the statute of limitations expiring or the assets being transferred due to delays.

Q5: What should I do first if a private equity product is overdue?

The first step is to calmly fix the evidence and save all the promotion and commitment materials. Do not delete the communication records with the sales; The second step is to verify the information of the manager, the trustee and the product filing, and determine the whereabouts of the funds; The third step is to assert rights in writing to the sales agency and the manager and keep the proof of service, interrupting the statute of limitations; The fourth step is to evaluate the application order of three paths: civil litigation, administrative complaints and criminal reports; The fifth step is to apply for property preservation in time and seek legal advice\nCross-border financeBased on the professional opinions of the column, we will formulate an overall plan.

This article is written based on the common judicial interpretations in the Beijing area. If the case occurs in other regions, it is recommended to consult local lawyers to verify the regional differences.

If you are currently facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the necessary evidence, to avoid missing the statutory time limit. →Financial capital legal services·Beijing Henglue Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and public adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. If you encounter disputes, please consult a practicing lawyer in time.