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11 Side Letters as a Means of Mitigating the Governance Challenge

From: The Law of Private Investment Funds (3rd Edition)

Timothy Spangler

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2023. All Rights Reserved.date: 30 May 2024

Regulated activities — Private fund

This chapter explains how an investor can mitigate the governance challenge by entering a side letter agreement with the fund and/or the fund manager. ‘Side letter agreements’ operate to amend or supplement particular terms within the fund documentation in order to accommodate the particular commercial, legal and regulatory needs of the investors. Side letters can be used to overcome provisions in the constitutional documents of a Partnership PIF or a Company PIF that have been deemed problematic. The chapter first provides an overview of general issues surrounding side letters before discussing the terms of a side letter and how this agreement can help address the governance challenge. It also examines practical issues that must be taken into account when assessing the potential effectiveness of side letters as a private monitoring solution to the governance challenge in private investment funds.

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