Private Equity Carried Interest Clawbacks: Navigating Clawback Mechanisms, Fund Agreement Provisions, Tax Considerations

Recording of a 90-minute CLE webinar with Q&A


Conducted on Tuesday, February 7, 2017

Recorded event now available

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Program Materials

This CLE webinar will discuss clawbacks of carried interest paid to private equity fund managers, focusing on the various clawback mechanisms, structuring fund economic provisions and clawback provisions, and the tax ramifications of clawbacks of carried interest.

Description

Most private equity funds provide for a clawback mechanism requiring the manager to return any carried interest back to investors if the manager earned more than the agreed-to percentage of distributions. A more complex scenario arises when the principals or employees who received the carry distributions are no longer employed by the firm.

Practitioners representing fund managers must be able to effectively draft fund agreement provisions that anticipate carry clawbacks on managers. Practitioners representing investors must understand their rights to recoup carried interest distributions to the sponsor.

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 paid to 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 clawbacks of carried interest.

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Outline

  1. Fund 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 clawbacks

Benefits

The panel will review these and other key issues:

  • How do variations in distribution waterfalls affect the timing of carried interest distributions to the sponsor? What are the related tax implications?
  • What are the available mechanisms for preserving the partners’ economic deal?
  • What are the key tax and nontax features of carried interest clawbacks?
  • What are the income tax ramifications of carried interest clawbacks?
  • What are the key GP-level considerations arising from carried interest clawbacks?

Faculty

Kallos, Chris
Chris P. Kallos

Partner
Kirkland & Ellis

Mr. Kallos is a corporate partner who is recognized internationally as one of the top attorneys in the area of...  |  Read More

Meehan, Daniel
Daniel P. Meehan

Partner
Kirkland & Ellis

Mr. Meehan is a tax partner in the Chicago office of Kirkland & Ellis LLP. His practice focuses on the tax...  |  Read More

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