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ARTICLE · 31 OCTOBER 2024

Understanding LPA Default Remedies

Mayer Brown
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A subscription credit facility is secured in part by the fund's and its general partner's ("GP") right to call unfunded capital commitments from the fund's investors, to receive capital contributions once funded.

United StatesFinance and Banking
Kiel Bowen
Kiel Bowen
Mark C. Dempsey
Mark C. Dempsey
Jonathan Rosaluk
Jonathan Rosaluk
Ethan E. Haddon
Ethan E. Haddon
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Executive Summary

A subscription credit facility is secured in part by the fund's and its general partner's ("GP") right to call unfunded capital commitments from the fund's investors, to receive capital contributions once funded and to enforce default remedies against investors who fail to fund. The default remedies in a fund's limited partnership agreement ("LPA") significantly impact the health and stability of the subscription credit facility because they incentivize investors to fund their capital contributions and help to provide adequate security for the facility. In this Legal Update, we explain common LPA default remedies so lenders can protect themselves in the event an investor defaults on its obligation to fund a capital contribution.

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