Provisions The Fund Documents Should Include On Liquidation

Explanation

The GP’s powers and responsibilities on liquidation, if the GP is to act as liquidator, will usually be set out in the fund documents and, in most jurisdictions, be subject to a detailed legal framework. It is important that these provisions are clear and exhaustive to reduce the likelihood of disputes on liquidation.

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Recommendation

The fund documents should include provisions on liquidation addressing:

• the GP’s power to realise the fund’s investments;
• the extent of LPs’ and carried interest holders’ liability following liquidation;
• escrow and/or clawback arrangements to cover potential future liabilities.