What it is
LPs give up control, so governance terms define what happens if the GP’s key people leave, if the GP behaves badly, or if the GP’s interests conflict with the fund’s.
How it works
Key person: if named principals stop devoting enough time, new investments are suspended unless LPs vote to continue. Removal: LPs can replace the GP for cause (fraud, gross negligence) and sometimes without cause by a supermajority. LP Advisory Committee (LPAC): a small group of LPs who review conflicts of interest and certain valuations.Example: the GP wants the fund to buy a property from the GP’s affiliate. A good LPA requires LPAC or LP-majority approval and arm’s-length terms first.Good for LPs vs. watch out for
✓ Good for LPs
- Key-person clause that suspends investing automatically
- Removal for cause by a reasonable LP vote; no-fault removal option
- Independent LPAC approval of affiliate transactions
- Written conflict and deal-allocation policy
⚠ Watch out for
- No key-person clause
- Removal requires near-unanimous vote
- GP can approve its own affiliate deals
- Broad exculpation covering gross negligence
How Story Samurai Investments handles it
Template: key person Ari Block [PLACEHOLDER – confirm], investment period suspended unless a majority in interest votes to continue (LPA §4.4); removal for cause by [PLACEHOLDER]% in interest (LPA §4.5); non-arm’s-length affiliate transactions require LP majority consent (LPA §4.3(c)); exculpation excludes fraud, willful misconduct and gross negligence (LPA §4.6). An LP Advisory Committee is [PLACEHOLDER – not yet in template; under consideration]. Conflicts are disclosed in PPM §7 [PLACEHOLDER – specific conflicts].
Based on our template documents (TEMPLATE, DRAFT FOR ATTORNEY REVIEW, NOT FOR USE). The final Limited Partnership Agreement controls.
Where to find it in the documents
- LPA §4.3–4.6
- PPM §5, §7
- Risk Factors #10, #11