Recommendations
Explanation Boards function as decision-making and review forums involving people with differing skills and approaches. Diversity of skills and styles leads to better balanced and informed decision-making. Recommendation In reviewing board composition, the board should be aware of the benefit of diversity in its selection as well as any applicable
Recommendations
Explanation A portfolio company's strategy consists of a number of core components that are the responsibility of the board. First and foremost is the development of long-term value creation through current and future revenue streams. The most important value corresponds to existance of such terms as effective and
Recommendations
Explanation One of the most important areas of due diligence that a GP should conduct before investing is the corporate governance at the potential portfolio company. The corporate governance systems, processes and controls employed by the company's senior management team provide insight into the effective management of the
Recommendations
Explanation There are a number of think tanks and organisations that offer best practice guidelines for director and corporate governance. The minimum and maximum size of the board is usually set out in the Investment Agreement and reflects the specific situation of the company, the governance objectives of the owners
Recommendations
Explanation Generally, factors affecting a portfolio company's workforce, customers, suppliers and communities should be evaluated at the board level. Social factors may include stakeholder dialogue and human rights issues, such as compliance with core labour standards in areas such as health and safety, child labour, illegal or forced
Recommendations
Explanation In general, GPs should support a prudent and sustainable approach to environmental risks and opportunities that may affect their portfolio companies. Such risks could relate to a range of factors including resource use/consumption, water scarcity, waste production and disposal; emissions in air, land and water; energy use, carbon
Recommendations
Explanation 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
Recommendations
Explanation In certain circumstances, LP co-investors of the fund or other third parties with whom GP is in some way connected may wish to invest directly in a company in which GP proposes to invest on behalf of the fund. If a co-investment is more successful than the fund as
Recommendations
Explanation At the time of investment by a fund, the investment decision is typically made in support of a specific strategy, business plan and management team. Often, during the negotiation process leading up to the investment by the fund, GP has had significant input into determining the target company'
Recommendations
Explanation There are a number of different ways in which GP can ensure that the fund can influence a portfolio company. Which is appropriate will depend on a number of factors (including the size of the Fund's investment and the degree of influence that GP considers appropriate). If
Recommendations
Explanation There will be a variety of documents that are created during the process of an investment, such as shareholder and investor rights agreements, partnership agreements and loan agreements. These are collectively referred to in this guide as Investment Agreement. The content of these documents will be influenced by many
Recommendations
Explanation It is important that the major shareholders agree on a common strategy for realising the investment before making it. It will not always be possible to realise this strategy, for example if the investment does not perform and/or buyers do not come forward, but it is desirable to
Recommendations
Explanation Depending on the size of the investment, GP will typically appoint one or more experienced members of its own staff or representatives to the portfolio company's board. The individuals appointed by GP typically have deep experience in the industry and often have been involved in the initial
Recommendations
Explanation Some portfolio company information will be confidential; the GP should be aware of this, as well as the need to treat company information with due regard to commercial sensitivity and the requirements of the portfolio company's other stakeholders. Recommendation The GP must not disclose information received from
Funds
Explanation If the fund permits the GP, its associates or officers to co-invest or to make parallel investments alongside the fund, there is a potential of creation a conflict of interest for the GP. Recommendation Subject to the provisions of the fund documents, details of co-investment arrangements should be disclosed
Recommendations
Explanation In some jurisdictions, it is common industry practice for different classes of investors to acquire different types of securities, depending on their relative position in the transaction, the type and amount of risk they assume, and the relative value they bring to the investment. Returns for each type of