Extensions are usually divided into active and passive extensions. Voluntary extension refers to the corresponding extension of the duration of the partnership through specific procedures at the expiration of the period agreed by the LPA in order to achieve the purpose of the partnership or to cooperate with the exit time node of the investment project. Voluntary extension is usually a contractual arrangement, which may be the result of relative optimism, or it may be a helpless move for both GP and LP in the case of many uncertainties. 
Once there is a passive extension, the result is usually not optimistic for investors, either the investment project cannot be withdrawn, or the manager has expected to be unable to exit until the expiration of the first period, and has to delay the liquidation by extension.
The common decision-making mechanisms for the extension of ** in China are as follows:
1) With the unanimous consent of all LPs. This arrangement is most beneficial to LPs;
2) Passed by resolution of the partners' meeting. The pros and cons of the arrangement are determined depending on the voting mechanism of the partners' meeting;
3) With the consent of the Managing Partner and the Administrator. The arrangement is likely to be most detrimental to LPs;
4) The first extension of the ** term can be directly decided by the GP manager, and the second extension of the ** term is generally decided by the partners' meeting. The arrangement is a compromise between the interests of all parties.
Regardless of the mechanism, the extension of the duration of ** must comply with the principles of "appropriateness" and "necessity". The principle of "appropriateness" is that the extension period of ** cannot be too long, generally speaking, it is 1 year or 1+1 year. If there is an extension period of more than two years, it is difficult to prove that it meets the principle of "appropriateness". The principle of "necessity" is that the manager must provide evidence to prove the necessity of extension when making decisions, usually one or several projects are facing a critical kick in the exit, and if it is not extended, it will be visible to the naked eye.
In our previous LP Protection Manual, we have repeatedly emphasized that investors must be wary of the automatic extension clause when signing the LPA, fully consider the "appropriateness" and "necessity" of the extension, and pay attention to whether to pay management fees during the extension period.
However, if the investor does not pay enough attention to this clause when signing the LPA, then when the **expires, the extension must be treated with great caution. If an automatic extension has been agreed upon and the administrator and the managing partner agree to the extension, there are not many good ways for investors to do so, and they may try to challenge the validity of the clause from the perspective of standard clauses, or challenge the legitimacy of the extension from the perspective of "appropriateness" and "necessity".
If the investor has the right to decide whether or not to extend, then whether or not to agree to the extension is crucial to recoup the loss. So how do you tell? Our understanding is as follows:
If the post-investment management operation of ** is standardized, the information disclosure is sufficient and the investee company is confirmed to be on the verge of the door, then it can consider agreeing to the extension;
If the extension is not possible and the extension does not solve the substantive problem, it is necessary to consider the substantive impact of the liquidation on both parties and then decide whether to agree to the extension.
It should be noted that the manager's strategy of avoiding the determination of losses and being sued by investors by postponing non-liquidation has an increasing probability of being questioned in practice. In some recent private equity disputes, if the manager neglects to liquidate when the ** expires, resulting in the investor failing to obtain the income as scheduled, and there is an objective economic loss, and the manager cannot provide evidence to prove that the investment loss is caused by normal investment risks, the manager needs to bear the corresponding liability for compensation, and the specific proportion needs to be allocated according to the degree of fault of the manager.
In addition, since 2020, AMAC has added a new "pending matter" to the AMBERS system for product filing, linking the **liquidation and the new** filing. If the liquidation application is not submitted by the expiration date, or the liquidation is not completed within 6 months after the application is submitted, it will appear in the special reminder, which may have a negative impact on the subsequent fund raising of the manager.