Top 10 Issues To Consider In Creating A Private Equity Fund

In Canada, for tax reasons, funds are typically set up as partnerships, which provide for flow-through treatment for fund gains and losses. Discussed are some of the issues that require consideration in establishing a private equity fund. The list is far from exhaustive, but will give you a flavour of the types of issues that require consideration, and which may result in some negotiation with anchor limited partners.

For funds going to market for the first time, the general partner typically prepares a term sheet summarizing the structure of the fund. This term sheet is typically reviewed by one or two potential anchor limited partners. Once the terms have been negotiated to the satisfaction of those limited partners, an offering memorandum incorporating those terms is generally prepared and a more detailed marketing process is undertaken for investment by other potential limited partners.