Virgin Islands Clauses Relating to Capital Calls
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How to fill out Clauses Relating To Capital Calls?
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FAQ
"Capital call" facilities (also known as "subscription line" facilities) are facilities made available to funds (often on a revolving credit basis and for general working capital purposes) which are secured against the uncalled capital commitments of the investors in the fund including: (i) the right to make capital ...
Capital calls are not without their risks, however. Because you don't actually have access to the funds until they arrive in your bank account, you may be unable to obtain all of the funds that you were initially promised from investors, which can lead to a default.
In most limited partner agreements, not all, there is a clause that says if a limited partner continues to not fund their capital commitments, they will forfeit all of their prior capital commitments. This means by missing one capital call they are actually walking away from a large amount of money.
A capital call is a legally binding agreement, and firms do have recourse if an investor doesn't pay. The firm can: Dilute the investor's partnership interest or equity. Turn the committed capital into a loan so that the investor has to pay interest on top of the original amount.
An LP who can't meet a capital call is considered in default and is potentially subject to penalties and legal liability. Generally, the fund manager determines which penalties outlined in the LPA, if any, to apply in any particular situation.
Capital calls are generally issued when an investment deal is about to close. The fund manager needs to adhere to the agreement that states the number of days' notice needed to make a capital call. For most funds, the notice period is 10 days.
If an LP doesn't respond to a capital call, it's called an LP default. In most limited partner agreements, not all, there is a clause that says if a limited partner continues to not fund their capital commitments, they will forfeit all of their prior capital commitments.
A capital call, also known as a "draw down," is the act of collecting funds from limited partners whenever the need arises. When an investor buys into a private equity fund, the firm makes an agreement with the investor that these funds will be available when the firm requests them.