Hunton & Williams LLP has extensive experience in creating private investment funds. We regularly represent fund sponsors and investors in virtually all matters relating to:
- private equity funds;
- real estate opportunity funds;
- distressed debt funds;
- special opportunity funds;
- residential and commercial mortgage funds;
- infrastructure funds;
- venture capital funds;
- mezzanine funds;
- hedge funds;
- funds of funds; and
- real estate and other joint venture opportunities with structures similar to those of the foregoing funds.
The group of lawyers who work on these matters is a multidisciplinary team comprised of members of the corporate and tax & ERISA teams. This practice group regularly organizes private funds and represents those funds throughout their life cycle — during the fundraising process, in their ongoing operations, as well as in connection with their wind down and dissolution. Our representation of funds in all stages is further informed by our experience representing private funds in the structuring and acquisition of investments (whether in real estate, private companies, development projects, debt, securities or other investments), in the management and oversight of their portfolio investments, and in connection with exit transactions. We also regularly represent prospective limited partners and other investors in private funds in negotiating the terms of their investments and their ongoing economic and control rights.
The diversity and breadth of the firm’s many practice areas help us better serve the needs of our clients in fund formation matters. The corporate lawyers in this group are experts in the federal securities laws, including the Investment Advisers Act and the Investment Company Act. They are also students of trend in fund formation contractual terms, SEC compliance and related matters. A sophisticated tax lawyer who understands the business deal as well as the tax and accounting ramifications is a vital part of the team for any private investment fund client. Members of our tax team understand the complexities of US and international taxation issues that confront private funds and their investors in complicated domestic and foreign tax structures, including effectively connected income (ECI), unrelated business taxable income (UBTI), sovereign wealth issues and withholding tax issues. Members of our ERISA team also are well-versed in the state and federal regulation of investments by ERISA plans and governmental plans. Perhaps most important, we have developed a keen understanding of the terms and structures employed by private investment funds and know how they have evolved and are continuing to evolve in current market conditions.
We have actively represented both institutional investors in negotiating and structuring investments in private funds and private fund sponsors during formation and private offerings of their interests. Through our involvement in representing both private equity funds and investors in those funds, we have developed an understanding not only of the legal issues that both sides consider important but also of the varying approaches taken by investors and by sponsors to the business terms, including what each understands to be “market” terms for specific fund types. We believe that our representation of both sponsors and investors generally improves our ability to serve all of our fund related clients.
Representation of Fund Sponsors
Hunton & Williams has represented private fund sponsors in all aspects of their business, including:
- structuring complex domestic and international structures;
- drafting partnership agreements, management agreements, private placement memorandum, subscription documents, and other relevant documents;
- providing advice with respect to compliance matters and securities laws exemptions relating to the private offering of interests; and
- negotiating terms with potential investors, including side letters, and closing investments in the funds.
Our professionals in the fields of corporate finance, taxation and the regulation of ERISA plans work closely as a team to create the fund and draft its key documents. Our multidisciplinary approach adds value to the process and results in fund documents that are easier for both the sponsors and limited partners to understand and implement over the life of the fund.
Fund Sponsor “Firm” Matters
We frequently assist individuals and firms in handling the variety of matters related to the “firm” and structuring the firm for scalable growth, including registration as investment advisers, carried interest participation structures, LLC and partnership agreements among the partners, co-investment vehicles, compliance programs, employment agreements and similar matters. We have handled “lift outs” of teams transitioning from one manager to another, including transitioning active funds, established firms in reorganizing aspects of their structure or admitting new partners and senior employees or partners in implementing arrangements with new employees.
Representation of Fund Investors
In representing the prospective investor, we undertake a detailed review of the offering memorandum, partnership agreement, subscription documents and any related documents proposed by the fund. We submit thorough comment letters to the fund sponsors on behalf of our client and negotiate the terms of all major agreements, with particular focus on the fund's partnership agreement. In reviewing the fund’s documents and negotiating the terms of our client’s investment, we involve our lawyers skilled in partnership law, tax law and ERISA regulation, and governmental plan regulation. We enlist the assistance of Hunton & Williams professionals in any particular industry in which the fund is focused, including real estate, project finance, tax credits, derivatives, mortgage finance and other industries.
We have reviewed a wide variety of investment fund documents for institutional investors in the private equity arena. This has allowed us to develop a keen understanding of what terms are standard or “market,” what terms are likely to evoke resistance and what terms present the highest potential for future legal or business disputes. We focus on potential conflicts of interest and how they are addressed. We use these skills to structure our client’s investment to maximize its protections and economic benefits and to minimize complications or legal issues during the life of the fund.
We have also represented investors on the sell side and buy side of secondary transactions, both for individual fund interests and large portfolios in structured sale processes. We understand market terms and can quickly identify potential issues and solutions for LP interests sellers and buyers.
Sophisticated Tax Capabilities
The tax lawyers at Hunton & Williams are creative problem-solvers and vital members of our private investment funds practice. Our tax lawyers have in-depth experience in the core tax areas that impact private investment funds, as well as the structuring techniques employed by private investment funds across a wide variety of asset classes. We frequently work with a variety of entities domiciled in offshore jurisdictions to optimize fund structuring, and adapt traditional fund structuring techniques to apply to tax considerations of certain investors or investment strategies. We have also worked with fund managers through tax questions or issues presented by investors during the operation of a fund and through audits and other inquiries.