Subscription Legal Updates
Foundational Legal Updates
All Subscription Legal Updates
Good Faith and Fair Dealing in Fund Finance Transactions
Every contract is subject to an implied duty of good faith and fair dealing pursuant to principles established under common law, state statutes, and, with respect to certain contracts, including fund finance credit documentation, the Uniform Commercial Code (“UCC”). While lenders and borrowers are permitted to pursue their respective interests, they are obligated to act in good faith.
Delaware Chancery Court Enforces Capital Calls Based on Subscription Documents and Contract Terms in a Partnership Agreement
In a recent post-trial memorandum opinion, the Delaware Court of Chancery ordered specific performance of capital calls issued under a fund’s limited partnership agreement, reinforcing that capital commitments are enforceable as contractual obligations when clearly documented in a fund’s governing documents and subscription agreements.
Sovereign Immunity in Subscription Credit Facilities: UK
Government pension plans, state endowment funds, sovereign wealth funds and other arms of sovereign states are often investors in funds which borrow under subscription credit facilities.
Investor Letters in Subscription Credit Facilities: Strategic Benefits for SMAs and Concentrated Investor Funds
Subscription credit facilities are a common financing tool for investment funds, enabling borrowing against the unfunded capital commitments of investors. Historically, lenders required investor letters (also referred to as investor acknowledgment letters) from each investor or at least each borrowing base investor to directly confirm their obligation to fund capital calls for the benefit of the lender.
The Spectrum of Loan Portfolio Backleverage Options: A Primer for Private Credit Funds
There is a spectrum of potential financing structures for a private credit fund (a “Credit Fund”) to obtain liquidity, including at various levels in the fund structure, such as at...
Evolving Competitor Definitions in Fund Finance
Recent developments in fund finance documentation reflect a significant shift in how insurance companies are treated under assignment provisions. Traditionally, “competitor” definitions have served to restrict loan assignments to entities...
How Regulation W Affects Subscription Credit Facilities
Section 23A of the Federal Reserve Act and its implementing regulation, Regulation W, impose restrictions on banks concerning “covered transactions” with their affiliates. With the increasing intertwining of banking institutions...
What to Know About Pro Rata Capital Call Requirements in Subscription Credit Facilities
Subscription credit facilities usually require the ability to make, receive, and enforce capital calls on a pro rata basis, whether directly or indirectly through a cascading pledge structure, on 100%...
Understanding LPA Default Remedies
A subscription credit facility is secured in part by the fund’s and its general partner’s (“GP”) right to call unfunded capital commitments from the fund’s investors, to receive capital contributions...
Subscription Credit Facilities: Understanding Shared Blockers
Private equity structures often use “blockers” to achieve certain tax benefits. In this Legal Update, we explain what blockers are, how they may be used in a subscription credit facility,...