Fund Legal Documents

Needed when a fund's governing body - typically the GP - lacks the competence, time or organisation to source and execute transactions itself but still wants control. Rather than a full management agreement, it signs an advisory agreement requiring the adviser to produce investment advice to certain standards and restrictions for the GP's consideration.

Most offshore funds use GPs that consider investment advice and decide on that basis, rather than being active in the market themselves.

An application by an investor wishing to be accepted as a Limited Partner. It forms part of the GP's KYC process - the GP must judge both whether the investor can be accepted and whether the fund is suitable for that investor.

Signed by the LP, it records the commitment, the bank account for distributions, reporting and communication lines, and the investor type (pension fund, bank, family company, trust, etc.). US and Canadian investors typically must supply additional information for later reporting, and the instrument evolves as cross-border tax reporting grows more complex.

The agreement between all Limited Partners and the General Partner. It defines the GP's authority and all partners' rights and obligations, and sets the terms on which the GP manages the partnership - investment restrictions, management fee (GP's share), hurdle rate, carried interest, clawback, catch-up - and names the keymen the GP must keep working for the fund.

The LPA is the single most important document in establishing a fund.

A marketing document explaining an investment opportunity to potential investors. Private equity funds issue a comprehensive PPM as part of the documentation investors require.

It covers management biographies, market presentations, manager track record, financial statements, a detailed description of the business or fund, legal terms, tax consequences and common risk factors. It is substantial and must align clearly with the LPA; in many jurisdictions both are legally reviewed for a legal opinion before the fund is registered or licensed.

A side agreement within a collective agreement under which one or more participants require special treatment - for example, an LP wanting to clarify when it may be excused from an investment.

In principle a side letter carries equal weight to the main agreement. Where it is unknown to other participants, or renders part of the main contract meaningless, it may sometimes be disregarded or ranked behind the main agreement.