Fund Formation 101: Issues To Consider When Forming A Private Equity Fund - Part 1 Structuring

This is the first part of a multi-part series on fund formations and investments.

Private equity funds are big business in Canada. According to PitchBook, there are almost 500 private equity funds in Canada, and that does not include the significant number of foreign funds that count Canadian individuals, companies and institutions as investors. Per the Canadian Venture Capital & Private Equity Association, investments by Canadian private equity funds totalled C$3.6-billion across 316 deals in the first half of 2023.

While structures can vary, private equity funds (Funds) in Canada are typically structured as limited partnerships to allow flow-through tax treatment for investors and to limit liability for investors as limited partners. Generally, the "sponsor" of the Fund will act as the general partner and manager of the Fund, and will seek different investors to act as limited partners. It will also normally be expected to have some "skin in the game" and