In most jurisdictions, there are legal obligations regarding the information that must be provided to stakeholders of portfolio companies. However, it is common practice for funds investing in portfolio companies to request more frequent and detailed information than is required by law. In particular, GP may require more frequent and detailed quantitative and qualitative information about the portfolio company. Reporting should reflect GP 's desire to influence strategy and value creation, as well as compliance with Europe Investor Reporting Guidelines and other specific reporting requirements to LPs in the fund or to regulators, as applicable. Such requirements may also depend on the shareholding percentage of the GP.
Typically, Key Performance Indicators (KPIs) are developed to enable the management of the portfolio company and GP to carefully monitor the company's performance.
This investment monitoring function and information flow should enable the GP to confirm that the investment is performing in accordance with the relevant business plan and investment thesis of the GP. It should also provide sufficient information to identify any shortfalls in targets or milestones and form the basis for remedial plans where appropriate.
GP should ensure that it devotes sufficient time and resources, including senior and experienced staff, to monitoring the fund's investments and allocates these resources and responsibilities appropriately both between funds and between investments.
At the time of the investment, GP should agree with the portfolio company's management on the financial and non-financial aspects of the investment and include in the investment agreements the financial and non-financial reporting requirements (including content, frequency and timing) which take into account its own reporting obligations, its ability to discharge its responsibilities on behalf of the fund as a shareholder, and the efficient and effective use of resources within the portfolio company.
GP should periodically prepare written analyses of the investments, which should be reviewed by senior and experienced executives of GP. The written analyses could address the performance of the portfolio company against the agreed investment thesis and the targets and milestones set out in the business plan for the portfolio company. They could also note significant developments since the last review and those likely to occur in the near future, and provide information on personnel changes and the financial and non-financial status of the portfolio company. Non-financial information should include environmental, social and governance KPIs.