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private equity fund formation checklist

Do “benefit plan investors” (e.g., private pension plans, etc.) The following chart illustrates a general fund’s structure. Has any Fund managed by your Firm invested in other funds or investment vehicles that invest in such instruments or contracts? Since the subject comes up more often than imagined, an overview of private equity fund formation might be helpful. h�bbd```b``�"w�H�� ��,~ ,�"Y��%`��x$Xd�� &�e[����Q ��D��>�@�ѳ�����7��W���"@��G&�;_��a`�+���i�[� Kz If yes to either, your Firm and the General Partner of the applicable Fund may need to consider whether a “Notice of Exemption” should be filed with the National Futures Association, or whether registration as a “Commodity Pool Operator” may be required. Other changes may need to be reported on Form 5 within 45 days of the end of the portfolio company's fiscal year. Cooley® is a registered service mark of Cooley LLP in the United States and European Union as well as certain other jurisdictions. %%EOF Private Equity, The compliance checklist should be reviewed regularly to recheck the issues covered as a means of measuring compliance with the governmental and contractual issues discussed below. The Fund will typically look to qualify for an exemption from Securities and Exchange (SEC) registration (e.g., no general solicitation, accredited investors, fewer than 100 investors, no commissions to GP for sale of partnership interest, GP will perform substantial duties for the partnership, and so forth.). In addition, your Firm will need to file an annual update by March 31 or within 90 days after the end of your fiscal year for federal purposes (but note that state deadlines may vary) of its ERA report confirming that all information is correct. Your Firm may need to demonstrate compliance with local transitional rules or private placement laws in each EEA member country in which it markets a Fund or Switzerland. If your Firm’s principal place of business is in the United States: Does your Firm manage only Funds that qualify as “venture capital funds,” or are your assets under management less than $150 million (on a gross basis, including uncalled capital)? Based on my industry experience, the prevailing industry standard is to form a Do any of the Funds managed by your Firm together with the Funds' General Partner entities and your Firm's managing principals beneficially own on a combined basis more than 5% of the securities of a public company? Does any General Partner of any Fund managed by your Firm hold (1) any financial account maintained by a foreign financial institution such as an interest in a foreign investment fund or (2) other foreign financial assets held for investment that are not in an account maintained by a US or foreign financial institution, with an aggregate value exceeding $50,000 ($100,000 in the case of taxpayers filing joint returns)? You answered “yes.” Please answer this follow-up question. Is your Fund required to maintain its status as a “venture capital operating company” under its Fund Agreement or any side letters? The following is a “compliance checklist” that is designed to help a typical venture capital or private equity firm consider its level of compliance against various governmental and contractual requirements that commonly apply. All rights reserved. Did the person or persons contacting the California state pension plan spend less than one-third of their working time managing the investments owned or controlled by your Firm? Does your Firm have an insider trading policy? The partnership audit rules enacted as part of the BBA generally take effect with respect to audits of partnership years beginning after December 31, 2017. As a prequel, here are some of the resources I’ve found helpful in launching a new fund: What it takes to start your own venture capital fund. ���L:�+��f���0#�,sVCB��� NF��V�iD`��3��dJ�L#� �Bk"iS^ ��LGǴ��={Ə��mXpH��p�Q�%�vv�� �. Has any Fund managed by your Firm invested in a put, call, cap, floor, collar, or similar option for the purchase or sale, or based on the value, of interest rates, currencies, commodities, securities, debt, indices, or other financial or economic interest or property of any kind? Please consult with Cooley if you have any questions. Or is your Fund subject to side letter agreements that call for making “Qualified Electing Fund” elections? A Form 8938 may need to be attached to your annual income tax return. As an “exempt reporting adviser,” your Firm may be required to file an Exempt Reporting Adviser report on Form ADV with the SEC. This fund formation checklist for private equity funds concentrates on formation and structuring prior to drafting the primary and ancillary documents commonly used in the launch of a private equity fund. Well before soliciting significant contributions from investors or loans from creditors to a private equity fund, the industry standard is to accomplish each of the tasks described above, from entity formation and creation of organizational documents to creation of subscription packages and SEC filing, etc. The matters discussed above are intended as a general description of the law; this document is not intended to provide specific legal advice or to create an attorney-client relationship with Cooley LLP. As an "exempt reporting adviser," your Firm may be required to file an Exempt Reporting Adviser report on Form ADV with the SEC. The SEC’s “pay-to-play” rules under the Investment Advisers Act (and similar state rules) may limit the ability to use placement agents and to receive any fees or other compensation from such public investors if your Firm or its principals or employees have made certain political contributions to candidates for public office. If the Fund acquires, in an IPO or afterward, shares of a public company and, following such acquisition, owns more than 20% of a registered class of equity securities, or owns more than 5% of the class of equity securities with either the intent to "change or influence control of the company's management" or the Fund has an individual serving on the Board, then the Fund should file a Schedule 13D with the SEC within 10 days of that acquisition.

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