10.13.6: Structure for LP Control: An Alternative to Divorce

Contributing Editor: Joseph W. Bartlett of Sullivan & Worcester LLP

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Abstract

STRUCTURE FOR LP CONTROL; AN ALTERNATIVE TO DIVORCE Herewith a possible a solution to the problem limited partners in private equity funds face when it becomes apparent that investor values will be negatively impacted until and unless the proprietors (the limited partners) are able to make their voices felt the way shareholders do these days in general business corporations … by disciplining and/or making changes in the management of the assets. Traditionally, this has been difficult for limited partners … particularly those which are super sensitive and averse to becoming involved in a controversy (the "shrinking violets"). First, prior to adoption of the Revised Uniform Limited Partnership Act, the notion was that limited partners might wind up crossing the line if they took a pro-active role, exposing themselves to liability as general partners. That concern has now been put to rest; but, nonetheless, the possibility remains that, if the...