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      What is a private equity fund?

      21 May 2019 by

      private equity fund
      private equity fund

      You may have heard of the term ‘Private Equity Fund’ (PEF) before. However, you probably weren’t sure what it actually means or what a Private Equity Fund does; or perhaps you were involved in such a fund or in a transaction with such a fund? The blog will briefly set out the characteristics of a Private Equity Fund.

      What is a Private Equity Fund?

      A ‘Private Equity Fund’ is a collective investment fund. Initially a PEF will seek to raise money from a number of different investors (i.e. the fund’s investors); it will then seek investment opportunities to make a return (capital growth and income) for its investors. Such investments made by the private equity fund are often referred to as portfolio companies.

      The fund’s investors are usually high net worth individuals and institutions such as insurance companies, pension funds, foundations, universities etc.

      How does it Work?

      A Private Equity Fund would normally be set up as a Limited Partnership (LP). A Limited Partnership will normally include one general partner, and any number of limited partners. This is not the only way such funds can be set up, but it is the most common. The difference between the ‘general partner’ and the ‘other’ is the general partner’s liability for the LP’s debts is unlimited; whereas the limited partners’ liability is limited to the amount of capital they have invested in the LP.

      The general partner will usually be the fund manager, responsible for the day to day management of the fund. It’s important that the limited liability partners (usually the investors) are not involved in the day-to-day management of the fund. If limited liability partners are involved in the day-to-day management of the fund they might lose their limited liability protection.

      It is also important to note that Limited Partnerships are ‘transparent’ for tax purposes. This means that the LP itself does not pay tax on any income and/or capital gains made. However, the investors will still be taxed on their share of the income or gains. For further advice in relation to any tax liabilities we recommend you seek advice from an independent accountant.

      Portfolio clients

      The fund’s investments include, but are not limited to:

      • Venture capital: the funding of a new business with little or no track record such as start-ups;
      • Development Capital: the funding of an existing, more mature business to help it develop; and/or
      • Buy-out: the funding of purchases of established business where there is still a margin for improvement of performance.

      The fund’s purpose is to seek opportunities and make investments to ultimately generate a return for its investors. This can be achieved through different methods, subject to the type of investment being made.

      The Corporate Commercial Department here at Fisher Jones Greenwood LLP can certainly guide you through commercial transactions as well as assist you with the preparation of any documentation required.

      Should you require any further information or assistance please do not hesitate to get in touch – call 01206 700113 or email [email protected].

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      We are welcoming clients back to our offices

      Differing tiers and three lockdowns later, Fisher Jones Greenwood Solicitors are now pleased to be able to welcome clients safely back to our offices.

      Remote working and the digitalisation of the way we work, have been key to keeping FJG and the rest of the country going.

      • We are now able to offer, pre-booked face-to-face appointments. Although, we are still able to offer remote appointments if preferred.
      • You can continue to visit our offices at any time to post any correspondence and documents through letterboxes.

      If you are visiting an FJG office, covid-19 safety rules of social distancing, hand sanitization, and the wearing of masks will still apply.

      • Please be aware you will also need to have your temperature taken on arrival.
      • There will also be protective screens in place to protect you and our staff.

      Please do not hesitate to contact your legal adviser by email or by telephone should you have any worries or concerns. Alternatively, please call our main switchboard number (01206 835300), and a message to return your call will be relayed to the relevant person.

      Best wishes
      Paula Cameron
      Managing Partner