Fund Formation

A substantial part of our practice includes fund formation and related services. Our tax and securities expertise enables us to create not only domestic venture funds, but also international funds as well as special investment vehicles such as angel and real estate investment funds.

 

Royse Law’s fund formation practice includes the following areas:

Structuring the Fund

Proper structuring of a fund requires an analysis of many factors, including the jurisdiction of its investors, location of its portfolio companies, and taxable or tax-exempt status of the investors. RoyseLaw regularly advises on the basic fund structure as well as more sophisticated techniques such as foreign parallel funds, blocker corporations and feeder funds.

Structuring the General Partner

Just as the structure of the fund must be carefully planned, so must the structure of the fund’s general partner. Usually, the promoters participate to a large extent in the success or failure of the fund through a substantial carry and a relatively small management fee. We typically represent the general partner in structuring and implementing such arrangements.

Drafting of Governing Agreements and PPMs

Funds are usually formed as Delaware limited partnerships or limited liability companies (LLCs). In either case, an organizational document (limited partnership agreement or LLC operating agreement) will establish the rights and obligations of the managers and investors. We offer substantial assistance with proposed terms for such agreements and we review the private placement memorandum (PPM) for legal and securities compliance.

Fund Services

Our representation does not end with a final document. There are invariably questions of compliance and we remain involved with the fund to assist in those and other operational issues.

Dispute Resolution

When the fund does not perform as expected, the fund managers may find themselves testing the provisions of their organizational documents. We are experienced in representing both the general partner and the investors in fund disputes, including issues surrounding the clawback, removal and replacement of a non-performing general partner, defaults in the limited partners’ capital contribution obligation and, in the rare case when all else fails, bankruptcy. The participants always hope for the best outcome when entering a fund relationship. However, it is important that fund counsel have experience representing clients in the event of a dispute.

Our Fund Formation Experts

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