As our other Top Ten posts have demonstrated, there is no shortage of risks for private fund sponsors to navigate in today’s economic and regulatory environment. Nevertheless, they need to prioritize the risk that hits closest to home – lawsuits by private litigants seeking to pull sponsors, their funds, and their board director designees into … Continue Reading
As litigation claims against portfolio companies have increased, so have accompanying claims asserted directly against funds (and their sponsors). Plaintiffs’ reasoning for including funds as defendants is no mystery: funds often have greater financial resources than the defendant portfolio company, particularly where the portfolio company is in distress, and thus represent the proverbial “deep pockets.” … Continue Reading
Another source of litigation risk for fund sponsors are claims brought by portfolio company employees. Sponsors should be aware of these risks, particularly when the portfolio company is in distress or is considering a sale or other transaction affecting the disposition of shares in the company. We have set forth below just a few examples … Continue Reading
Private funds frequently negotiate for special rights when making an investment in a portfolio company, such as the right to appoint one or more board directors, voting rights, and liquidation preferences. Fund sponsors often focus solely on the positive aspects of these special rights, such as increased control, without considering fully other implications. As the … Continue Reading
Over the last few years, we have seen an uptick in litigation claims against sponsors and funds arising out of their interests in portfolio companies. A fund sponsor’s participation on a portfolio company board, in particular, is a risk factor for the entire investment structure (the GP, the Management Company, individual members of the GP … Continue Reading
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