Stroock Private Funds Practice Group Special Bulletin
“Managing Sales by Distressed Private Equity Investors”
The recent economic downturn has caused a number of investors in private equity funds to experience liquidity crunches and to either default or consider defaulting on their capital commitment to the funds. Among other options, a fund manager may consider providing assistance to such investors in selling their interests because doing so may reduce the loss of committed capital, or prevent delays in calling capital, while at the same time preserving goodwill and the manager’s continued relationship with such investors.
This Stroock Private Funds Practice Group Special Bulletin examines certain fiduciary, regulatory, legal, tax and other issues that a manager of a private equity fund should consider in connection with providing such assistance to a defaulting or near-defaulting investor seeking to transfer its interest in the fund.