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The Legal Issues You Need to Nail Down for Your New Private Equity or VC Fund
- As you establish a private equity or venture capital fund, ensure key formation documents are in place for the general partner entity (GP Entity) and the management company entity (ManCo Entity), addressing profit-sharing, legal, and tax obligations.
- Key agreements govern economic issues such as carried interest distribution, GP capital commitment, management fee income, and salary allocations among co-partners.
- Management of team changes, succession planning, investment decisions, hiring/firing, and operational decisions are crucial for fund success.
- Restrictive covenants like non-compete agreements and investment opportunity allocation need careful consideration to protect fund interests.
- Dispute resolution mechanisms, non-compete clauses, carried interest vesting schedules, and fund track record attribution should be meticulously defined to avoid conflicts.
- Understanding economic, control, and covenant issues will help foster strong partnerships and ensure alignment with fund goals and investor interests.
- Properly structured agreements and adherence to best practices in fund formation can lead to successful outcomes for fund managers, co-partners, and investors.
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