Recommendations & Factors That The Fundraising Team Should Consider

Recommendations

Provisions for Distributions From a Fund

What provisions should be made regarding distributions from a fund to LPs?

Recommendations

The Issues Considering when Managing Listed Investments

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

Sale of a Portfolio Company Between Funds Managed by the Same GP

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

Should a Cash Exit Always be Sought?

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

Should Guarantees and Indemnities be Given on Exit?

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

Who Should Make a Decision to Exit an Investment?

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

Special Considerations When Establishing, Investing in, and Managing a Fund

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

When Should The Sale of Investment Take Place?

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

Provisions GP Should Make for Follow-on Investments

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

Appropriate Structure & Level of Compensation for the Portfolio Company's Employees

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

What Does It Mean to be a Board Member?

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

Whose Interests Does the GP-appointed Director Serve

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

Skills Needed by GP-appointed Director to be a Board Member

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

Factors to be Considered by GP When Evaluating Shareholder Consent Issues in a Portfolio Company

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

Exercising of Influence to Investment Strategies, Policies and Practices at a Portfolio Company

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

Liabilities Associated with Board Membership

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