Clawback Guaranty
What this document covers
The Clawback Guaranty is a legal document typically used in private equity arrangements. It serves as an assurance from the Guarantors, ensuring timely payment of their obligations to the partnership. Unlike other guaranties, this form specifically addresses the return of funds related to carried interest in a partnership context, making it essential for ensuring compliance with partnership agreements and protecting the interests of limited partners.
Key parts of this document
- Identification of the Guarantors and the Partnership.
- Definition of the Guaranteed Obligation related to carried interest returns.
- Waiver of rights by Guarantors, including presentments and demands for payment.
- Details on the continuing nature of the guaranty until obligations are met.
- Notices regarding expenses related to enforcing the guaranty.
- Governing law, specifying Delaware as the jurisdiction.
When this form is needed
This form is commonly used when forming a private equity fund and securing commitments from investors (Limited Partners) regarding their financial obligations. It is crucial when the partnership agreement includes provisions for clawback in the distribution of profits, ensuring that any amounts owed to the partnership can be legally recouped from the Guarantors.
Intended users of this form
- Private equity companies looking to secure investment commitments.
- Limited Partners wanting to ensure their interests are protected in partnership agreements.
- Guarantors participating in a private equity fund who need to document their obligations.
How to complete this form
- Identify and list all parties involved, including the Limited Partners and Guarantors.
- Clearly define the Guaranteed Obligation and calculate each Guarantor's share based on carried interest provisions.
- Include any financial assumptions or factors, such as the Assumed Tax Rate.
- Ensure that all Guarantors sign and date the document to validate their agreement.
- Retain a copy with all partners for future reference and compliance checks.
Is notarization required?
This form does not typically require notarization to be legally valid. However, some jurisdictions or document types may still require it. US Legal Forms provides secure online notarization powered by Notarize, available 24/7 for added convenience.
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Make edits, fill in missing information, and update formatting in US Legal Forms—just like you would in MS Word.
Download a copy, print it, send it by email, or mail it via USPS—whatever works best for your next step.
Sign and collect signatures with our SignNow integration. Send to multiple recipients, set reminders, and more. Go Premium to unlock E-Sign.
If this form requires notarization, complete it online through a secure video call—no need to meet a notary in person or wait for an appointment.
We protect your documents and personal data by following strict security and privacy standards.
Typical mistakes to avoid
- Failing to accurately define the Guaranteed Obligation, leading to disputes later.
- Not obtaining all necessary signatures from Guarantors, which may invalidate the form.
- Ignoring state-specific legal requirements or terminology.
- Assuming the guaranty is void if one Guarantor is unable to fulfill obligations.
Advantages of online completion
- Instant access to a legally drafted Clawback Guaranty template.
- Easy customization to fit specific partnership needs.
- Convenience of downloading and printing from anywhere.
- Ensures compliance with legal standards to protect your interests.
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FAQ
The catch-up is a method for allowing a real estate private equity fund's Manager's share of net cash flows to defer to those of the Investors until a predetermined investment performance milestone is achieved by the Limited Partners (the Investors), after which point the profit cash flows to the Manager are caught-up
In terms of hedge funds, a clawback clause is a clause in a limited partnership agreement protecting the limited partners from paying more than the agreed upon carried interest percentage when factoring losses.With no clawback, the general partner would be entitled to $100 million (20% of $500 million).
Profit share) to be paid out to the general partner in priority to profits going to the limited partners and, in the. early years of the fund, the limited partners may fund this profit share until the partnership starts to generate profits.
A clawback is a contractual provision whereby money already paid to an employee must be returned to an employer or benefactor, sometimes with a penalty. Many companies use clawback policies in employee contracts for incentive-based pay like bonuses. They are most often used in the financial industry.