Recommendations
Explanation There are a number of issues that affect GP when it holds listed (quoted) investments. Dealing in such investments will often be subject to additional regulation (such as prohibitions on insider dealing and market abuse). The GP may also need to consider the impact on the market of its
Recommendations
Explanation Situations where funds managed by the same GP are transacting between themselves inevitably lead to conflicts of interest as each vehicle may have different investors and therefore different interests. Such conflicts are typically difficult to resolve and therefore in most circumstances are unlikely to be acceptable to LPs. That
Recommendations
Explanation A GP’s obligation is to seek the best returns from an investment for the fund and the GP must consider opportunities to effect non-cash disposals in light of this. It may be that, for example, there is no cash purchaser for an investment, or that a cash price
Recommendations
Explanation A purchaser of a portfolio company may seek a range of warranties and indemnities from the fund. Negotiation over these will invariably be a key issue for the GP when disposing of an investment. During negotiations, the GP must consider the risks and detriment to the fund in giving
Recommendations
Explanation Since the decision to exit is a judgment call, it is important that the decision-making process involves GP in the same way as it is the original investment. Executive experience is needed to evaluate the risks and rewards of the decision. If co-investors from the fund are involved, this
Recommendations
Explanation The obligations of a fund's GP and LPs to each other, portfolio companies, stakeholders and the public at large are fundamentally the same as for other types of private equity investments. The difference lies in the greater likelihood that the actions of the GP will affect stakeholders
Recommendations
Explanation Determining the right time to sell an investment is a judgement call for GP. Any decision to dispose of an investment involves a comparison of the current value of an investment, its potential future value and the opportunities to realise that value in the future. In making this consideration,
Recommendations
Explanation It may be necessary or desirable to make follow-on investments in a portfolio company (e.g., for the fund expansion plans or for the refinance a poorly performing portfolio company). The ability to make a follow-on investment in a successful portfolio company may create a conflict of interest if
Recommendations
Explanation The structure and compensation of portfolio company employees and management should induce excellent long-term performance, reward sustainable financial and non-financial results, and ethical behaviour. Balancing compensation in the context of the particular industry, the expertise and contribution of the individual, and the long-term needs of the company are important
Recommendations
Explanation An overriding duty of loyalty to the company applies to every director, whether executive or non-executive and whether or not appointed by a particular shareholder, although the precise legal duties vary according to the type of company and jurisdiction. A director is expected to devote as much time and
Recommendations
Explanation Regardless of the type of appointment, directors do not serve the interests of any particular shareholder, but act in the best interests of the portfolio company. The position of a director is a fiduciary one. A director does not act as an agent or advocate of the board that
Recommendations
Explanation Many skills are applicable to become a board member. In particular, the company may need directors with industry experience, legal, corporate finance or accounting experience, or general management experience relevant to the company and/or the sector and region in which it operates. All of these skills, plus the
Recommendations
Explanation The level of GP (investor) consents that are deemed appropriate are usually agreed to during the negotiation of the investment Agreement. Typically, an investment will be structured so that certain proposed actions of the portfolio company will require shareholder consents, including GP on behalf of the fund. These shareholder
Recommendations
Explanation GP may be in a position to exert significant influence over the development, implementation and monitoring of ESG strategies, policies and practices at portfolio companies. The GP should ideally be able, through the information produced and provided by the portfolio company, to identify, monitor and support the mitigation of
Recommendations
Explanation The position of a board member is a responsible and trusted position and no one should be forced to accept the position. Some individuals may be unwilling to accept the position because of the potential liabilities associated with the position of a director. Depending on the jurisdiction, directors may
Recommendations
Explanation Someone with a good track record as a director may find themselves invited to serve on multiple boards. This may result in the person having limited time to fully perform their duties. Recommendation A director should accept only as many directorships as he or she can reasonably be expected