Continuation Vehicles

Continuation vehicles are a tool to allow a sponsor to transfer one or more portfolio assets from an existing fund to a new, sponsor‑affiliated vehicle to extend ownership and pursue additional value creation, often with a reset of economics and infusion of new capital. These transactions may create perceived or actual conflicts when sponsors benefit from renewed fees or carried interest, while existing investors must choose between selling their interests or rolling into the new structure. Continuation vehicle disputes typically focus on whether investors had a meaningful, fully informed opportunity to evaluate and approve the proposed transaction before it closes. Investor challenges may arise when the sponsor seeks to move forward with a continuation vehicle transaction on a compressed timeline or without providing investors adequate disclosure and deliberation time.

Potential Continuation Vehicle Disputes

Investor complaints related to continuation vehicles may target the sufficiency, balance, and consistency of disclosures provided to advisory bodies (such as the Limited Partner Advisory Committee (LPAC)), existing investors, and prospective continuation vehicle investors. Potential concerns may include:

• Material misstatements or omissions by the sponsor relating to valuation, asset life, and prospects for alternative liquidity events, with claims that internal or existing investor‑facing narratives were more conservative than materials shared with potential continuation vehicle investors.
• Procedural defects, such as insufficient time for review by existing investors of the proposed transaction, limited access to data, and limited or constrained opportunities for independent discussion among advisory board members or investors.
• Self‑dealing and conflicts with respect to the sponsor, including structures perceived to maximize sponsor economics (e.g., new fees or carried interest) while diminishing existing investor returns.
• Obtaining inadequate or uninformed approvals from the existing investors, including “divide‑and‑conquer” solicitation strategies and asymmetric communications that allegedly discourage collective deliberation among existing investors or the LPAC.
• Fairness opinions in respect...