The Institutional Limited Partners Association (ILPA) has just released the first publicly available Model Limited Partnership Agreement (LPA) for the private equity industry. A link to download the agreement is available at the end of this article.
The new legal template, which is available for complimentary, industry-wide use, conforms to ILPA Principles 3.0 (first published in 2009, and updated in 2011 and 2019) and sets a new standard for alignment of interests between general partners (GPs) and limited partners (LPs).
In addition to structuring better alignment of interests, the Model LPA also addresses the need of GPs and LPs to reduce the complexity, cost and resources required to negotiate the terms of investment in private equity funds.
“The industry has to date lacked freely accessible model documents that can serve as a baseline for reasonable legal terms and conditions associated with private equity funds,” said Steve Nelson, CEO of ILPA. “Consequently, the hundreds of LPAs developed each year are the product of bespoke efforts and one-off negotiations that come with excessive cost to both GPs and LPs. We encourage all industry stakeholders to review the ILPA Model LPA and use it as a basis for a more effective process, with the confidence that the provisions therein are supported by the limited partner community.”
For general partners, the Model LPA can be used as a foundational component of a limited partner-friendly fundraise, recommending legal language deemed as fair and reasonable by the limited partner community.
The Model LPA was developed by a group of 20 attorneys that represent both
general partners and limited partners in fund formation.
According to the ILPA, the new form of agreement may be helpful for new managers who wish to follow best practices and attract limited partner capital, while minimizing associated legal costs. The Model LPA can also be used by general partners to minimize the number and scope of side letter agreements with their limited partners.
The Model LPA, developed by a group of 20 attorneys that represent both general partners and limited partners in fund formation, is written to conform with Delaware law and a “whole of fund” waterfall. A consultation draft of the document was released in the fall of 2018 to the ILPA membership and certain stakeholder groups for comment, and these comments were incorporated in the fall of 2019. Additional versions of the Model LPA, including one based on a “deal-by-deal” waterfall, are planned for the future.
The full template of the Model LPA is available for download from the ILPA website and can be accessed by clicking HERE (PDF format) or HERE (Word format). An overview of the document’s key terms on three easy to read pages is available HERE.
The Institutional Limited Partners Association has more than 525 institutional members representing over $2 trillion of private equity assets under management. The ILPA’s goal is to advance the interests of limited partners and their beneficiaries through best-in-class education, content, advocacy and networking. The ILPA is based in Washington, DC.
© 2019 Private Equity Professional | October 30, 2019
