Structures LPA terms covering fund economics, governance, investment period mechanics, harvesting period provisions, key person clauses, and LP protective rights for private investment funds.
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Confirm fund parameters — Verify fund strategy, jurisdiction of formation, target size, and GP/LP entity structures. Determine whether the fund follows a blind-pool or deal-by-deal model, as this affects commitment and drawdown mechanics.
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Set economic terms — Draft management fee provisions specifying rate, calculation basis, offset mechanics (for portfolio company fees), and step-down schedule post-investment period. Define carried interest allocation, including hurdle rate, catch-up percentage, and whether carry is calculated on a deal-by-deal or whole-fund basis.
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Draft investment period mechanics — Specify start date, duration, early termination triggers (key person event, LP vote, cause), and any GP right to extend (typically 1 year with LPAC consent). Define reinvestment rights: distinguish between recycling of invested capital returned within the investment period vs. reinvestment of follow-on amounts post-period.
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Draft harvesting period provisions — Set duration (typically 2–3 years post-investment period), permitted activities (follow-on investments, defensive actions), and extension rights. Specify limits on new platform investments.
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Structure key person provisions — Name key persons and define trigger events. Specify whether a key person event suspends the investment period automatically or requires LP vote. Draft cure mechanics: replacement timeline (typically 90–180 days), LPAC or LP approval for replacement, and consequences of failure to cure.
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Build distribution waterfall — Draft the multi-tier waterfall: (a) return of contributed capital, (b) preferred return, (c) GP catch-up, (d) carried interest split. Include clawback obligations with escrow percentage (typically 20–30% of carry distributions) and GP guarantee language. Specify tax distribution mechanics. [VERIFY — state law governs clawback enforceability and escrow requirements]
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Draft LP governance and protective rights — Define LPAC role (conflicts review, valuation oversight, fee offset approval). Set voting thresholds for no-fault termination, cause removal, fund term extension, and amendments. Specify information rights and reporting cadence.
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Address regulatory and tax provisions — Include ERISA plan asset regulation compliance (25% blocker or operating company exemption), UBTI mitigation structures, FATCA/CRS reporting obligations, and anti-money laundering representations. [VERIFY — ERISA thresholds and tax structuring depend on fund-specific facts]
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Draft transfer, withdrawal, and default provisions — Specify LP transfer restrictions (GP consent, minimum transfer size, ERISA/tax-exempt assignee limitations). Define LP default consequences: forfeiture percentage (typically 25–50% of capital account), loss of voting rights, forced sale at discount.
