Reviewing the tax section of a private equity fund limited partnership agreement
Produced in partnership with Ceinwen Rees of Macfarlanes
Reviewing the tax section of a private equity fund limited partnership agreement

The following Tax guidance note Produced in partnership with Ceinwen Rees of Macfarlanes provides comprehensive and up to date legal information covering:

  • Reviewing the tax section of a private equity fund limited partnership agreement
  • Where to start
  • General provisions/operation of the fund
  • The distribution waterfall
  • Allocations
  • Commitments and drawdowns
  • Subsequent closings
  • Withholding tax
  • FATCA, CRS and other tax information exchange agreements
  • Anti-hybrids
  • more

This Practice Note sets out what to look for when reviewing the tax sections of a private equity fund limited partnership agreement (LPA). It is drafted for a fund set up as an English limited partnership, but many of the comments can be applied equally to the other common fund jurisdictions, such as the Cayman Islands, Channel Islands and, more recently, Luxembourg.

This Practice Note is aimed at a tax lawyer who has been asked to review, or draft, an LPA and therefore focuses on the tax aspects of the agreement. As with any agreement, it should be stressed that tax can crop up anywhere so it is important to read the entire LPA. Although many features of an LPA are highly bespoke (such as the sections governing the fund’s investment strategy and economics) there are enough common features that once you have reviewed one LPA the second will feel more familiar.

The clauses discussed below may not appear in the order listed or have the same title. In some cases you may need to search through the document to locate the relevant clause.

Where to start

Before you open the LPA, it is worth asking to:

  1. review the private placement memorandum (the PPM) if there is one (see Table: Understanding the tax disclosure in a fund Private Placement Memorandum (PPM)), and