Private Equity Carried Interest Clawbacks: Fund Agreement Mechanisms and Tax Considerations

Note: CPE credit is not offered on this program

A live 90-minute premium CLE video webinar with interactive Q&A

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Tuesday, April 11, 2023

1:00pm-2:30pm EDT, 10:00am-11:30am PDT

Early Registration Discount Deadline, Friday, March 17, 2023

or call 1-800-926-7926

This CLE course will discuss clawbacks of carried interest distributions received by private equity fund managers, focusing on the various clawback mechanisms, structuring fund distribution waterfalls and clawback provisions, and the tax ramifications of clawback events.

Description

Most private equity funds provide for a clawback mechanism requiring the fund manager to return carried interest to investors if the fund manager has received more than the agreed upon percentage of total distributions at the end of the life of the fund.

Carried interest clawbacks can present challenging scenarios, including when no longer employed principals or employees received the carry distributions, and when principals or employees have paid taxes on carry distributions prior to the clawback.

Practitioners representing fund managers must be able to effectively draft fund provisions that anticipate carried interest clawbacks, taking into account the nature of the fund's distribution waterfall and key tax considerations. Practitioners representing investors must understand their rights to recoup carried interest distributions to the fund manager where appropriate. There are tax consequences when managers or sponsors must return carried interest already distributed. Fund documents must be carefully drafted to address these tax consequences.

Listen as our authoritative panel of investment fund practitioners analyzes scenarios in which carried interest distributions received by a private equity fund may be subject to clawback. The panel will discuss various clawback mechanisms, fund economic provisions, clawback provisions, and the tax ramifications of clawback events.

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Outline

  1. Fund distribution waterfall options and carried interest economics
  2. Options for preserving the economic deal
  3. Tax implications of carried interest clawbacks
  4. Detailed analysis of clawback features
  5. GP-level implications of carried interest clawback

Benefits

The panel will review these and other key issues:

  • How do variations in distribution waterfalls impact the timing of carried interest distributions to the sponsor?
  • What are the available mechanisms for preserving the partners' economic deal to the greatest extent practicable?
  • What are the critical tax and non-tax features of carried interest clawbacks?
  • What are the income tax ramifications of carried interest clawbacks?
  • What are the GP-level considerations arising from carried interest clawbacks?

Faculty

Mannon, Joseph
Joseph M. Mannon

Shareholder
Vedder Price

Mr. Mannon is Chair of Vedder Price's Private Fund Formation group and a member of the firm's Investment...  |  Read More

Rosenberg, Max
Max J. Rosenberg

Partner
Paul Hastings

Mr. Rosenberg focuses his practice on the representation of private investment fund sponsors, managers and investors in...  |  Read More

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Early Discount (through 03/17/23)

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Early Discount (through 03/17/23)

You may pre-order a recording to listen at your convenience. Recordings are available 48 hours after the webinar. Strafford will process CLE credit for one person on each recording. All formats include course handouts.

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