In recent years, buyout funds have increasingly begun to offer parallel IVAs for tax-exempt and non-U.S. funds. INVESTORS, UBTI and ECI to „block“ fund investments in pass-through operating companies. These structures are offered to investors either to satisfy UBTI and ECI funds in their partnership agreements – which have been specially developed with parallel AIVIs in mind – or simply to be „investor-friendly“. In recent years, many private equity funds have been able, as part of their partnership agreements, to create „alternative investment vehicles“ to facilitate one or more specific investments. As a general rule, a fund is authorized to create an AIV to address the „tax, legal or regulatory“ concerns of a partner or the company as a whole. In the parallel structure of the AIV, the main fund invests directly in the operational LLC and the sponsors who have opted for the parallel AIV choose not to invest directly in the direct investments of the main fund. Therefore, the Fund`s partnership agreement should have optout mechanisms, so that allocations, distributions and other economic provisions result in some investors participating only through the parallel VIA. In particular, the rules for awarding the Fund`s partnership agreement should help allocate revenues from the operational LLC, which will generally represent UBTI and ECI, specifically to only partners who did not participate in the parallel VIA16.
Base. Yes, for example. B, there are aggregate losses in the main fund and a profit in a parallel AIV (or vice versa), specific adjustments must be made. Depending on the date of the Fund`s cash flow, it may therefore be impossible to implement the opt-out to perfection. Parallel AIVts also do not prevent the fund from itself being active in the trade or activity of LLC operating in the United States, in which the fund and its parallel AIV invest. As a result, parallel IVAs will generally not meet contractual obligations under typical partnership agreements for UBTI and ICH, which generally require the co-employer to use a specific effort (. For example, „commercially reasonable efforts“ or „best efforts“ to prevent the fund from becoming a commercial or commercial activity and to avoid the production of UBTI and EBI. However, partnership agreements can be specifically designed to ensure that UBTI and ECI companies are considered satisfied when the comple or tax-exempt countries have offered parallel IVAs to non-U.S.
countries. Investors (whether or not these investors choose to participate in the parallel AIV). A number of buy-back agreements contain this specific tax language parallel to the AIV, and some venture capital funds have updated their partnership agreements to include this language. A fund`s partnership agreement generally requires that the terms of the AIV be „substantially identical“ to the terms of the Fund`s partnership agreement, unless necessary to meet the tax, legal or regulatory objective for which the AIV was created.