How to recover investment funds after a Shenzhen private equity fund defaults? Practical analysis by Zhiming Law Firm

In the summer of 2023, Mr. Liu from Futian, Shenzhen walked into Guangdong Zhiming Law Firm with a grave expression. The private equity fund contract he had signed had been overdue for 90 days after maturity, and his 3 million yuan investment had yet to arrive. Initially, the fund manager delayed with the excuse of "tight market liquidity," but later even the office was vacated — the workspace in the Nanshan District Science and Technology Park had long been deserted. Mr. Liu went to the police station and the financial affairs office, but the answer he received was always "it is recommended to pursue legal channels." What truly worried him, however, was how long this kind of financial contract dispute would drag on. Could his money still be recovered?

I. Private Fund Contract Breach: Where Exactly Does the Problem Lie?

Mr. Liu signed a "Private Investment Fund Contract" with a private fund company in Shenzhen in 2019, stipulating that the funds would

After taking over as the director of Zhiming Law Firm, Lawyer Shen Jinlong (22 years of practice, master's degree from Fudan University), the first thing he did was to penetrate the contract terms. He discovered a key loophole: the contract did not explicitly stipulate the liability for breach of contract for overdue payment in accordance with Article 577 of the Civil Code, and the equity of the technology enterprise invested by the fund was pledged to a third-party bank by the original shareholders as early as 2022- this constitutes fundamental information concealment.

2. Strategic Rights Protection: A Combination Punch to Break Through Asset "Firewalls"

Zhiming Law Firm's独创 "Zhiming Art Litigation Method" was brought to bear with concentrated force in Mr. Liu's case.

First step: immediately apply to the Shenzhen Nanshan District People's Court for pre-litigation property preservation, freezing the last 2.3 million yuan of idle funds in the fund's bank account. Second step: in accordance with Article 87 of the Securities Investment Fund Law, sue the fund company

Ask:"Does a promise of 'guaranteed principal and guaranteed returns' in a private equity fund contract actually hold up?"
Answer:Such clauses are often written into supplementary agreements or verbal commitments. Article 15 of the Interim Measures for the Supervision and Administration of Private Investment Funds explicitly prohibits guaranteed principal and returns, but if a fund company induces signing through false promises, liability for negligence in contract formation can be claimed. We once represented a similar case in Longhua District, where the court ultimately supported the investor's claim for 70% of the principal.

III. Litigation Reversal: Recovered 2.8 Million Yuan in 8 Months

During the trial of the case, the fund company argued in its defense that "the losses were caused by market risks." However, the legal team from Zhiming Law Firm submitted 21 sets of evidence, including: the Business Plan sent to Mr. Liu during the fundraising clearly stated "expected annualized return of 18%," which completely contradicted the risk warnings in the contract; and the 2022 annual financial report of the underlying tech company showed positive net assets, yet the fund's capital had never actually entered the company's account. The court ultimately found that the fund company had committed a fundamental breach of contract, ordered it to compensate Mr. Liu for the principal amount of RMB 2.8 million (accounting for 93.3% of the total investment), and to pay delayed performance interest at 1.5 times the LPR. From filing the lawsuit to completion of enforcement, the entire process took 8 months.

IV. Similar Financial Disputes: What to Do in Case of Financial Leasing and Trust Defaults

Shenzhen handles over 30,000 financial cases annually, with financial leasing contract disputes and trust product defaults being the two high-incidence areas. In early 2024, Zhiming Law Firm represented a financial leasing dispute for a company in Longhua District, with a claim amount of 12 million yuan. Senior Partner Shen's legal team discovered that the leased equipment (large CNC machine tools) had been resold without authorization by the lessee. Based on Article 745 of the Civil Code concerning the lessor's ownership rights over the leased property, they promptly applied for seizure of the equipment and ultimately obtained court support.

Ask:In a bank loan dispute, if the guarantor was deceived into signing, can they be exempted from liability?
Answer:It depends on whether it constitutes a "false expression of intent." Article 146 of the Civil Code has clear provisions. In a 2023 case at Futian Court, the guarantor proved that the main contract was a "loan to repay a loan" and that the guarantor was not informed, and the court ruled the guarantee contract invalid.

Five, Pitfall-Avoidance Guide: Three Key Points to Watch When Signing Financial Contracts

Whether in private equity, trusts, or financial leasing, these three items in the contract documents are the most prone to hidden traps:

1. Fund investment direction clause.—Must specify the specific underlying asset names, valuation reports, and guarantee methods, and reject vague expressions such as "intended investment" or "to be determined";
2. Method for Calculating Liability for Breach of Contract—According to Article 585 of the Civil Code, liquidated damages cannot exceed 30% of the loss, but many contracts only state "bear according to the agreement," which is equivalent to not writing it at all;
3. Place of jurisdictionTry to stipulate that the agreement falls under the jurisdiction of the Shenzhen Futian District Court or Nanshan District Court to facilitate local litigation and property preservation.

Six, The Crucial Moment: Don't Wait Until the Company Skips Town to Take Action

Mr. Liu was able to recover 93% of the investment funds, thanks to his quick response - he hired a lawyer just one month after the deadline. If the fund company enters bankruptcy liquidation, ordinary investors will only be "inferior creditors" and will hardly receive any money. Guangdong Zhiming Law Firm has been established for 26 years and has represented a large number of cases, accumulating rich practical experience in the field of finance and securities in Shenzhen. If you are facing securities disputes, lease defaults, trust defaults, or bank loan disputes, please do not hesitate. Call 0755-25986969 immediately, or go directly to Room 1802, Building A, Xintian Century Business Center, Shixia North Second Street, Futian District, Shenzhen, to have a professional team customize a rights protection plan for you.

LabelPrivate fund default, financial contract disputes, Shenzhen lawyer, recovery of investment funds, trust overdue, financial leasing disputes, strategic rights protection.