There are several implications for the IRS, which qualifies the Fund as DRE. Since the fund, as a DRE, is not authorized to file a tax return for the corporation, the entire activity should be included in the PPA`s tax return. If the IRS makes the decision when the Fund has already filed several years of tax returns, it may require, from an administrative point of view, many amended tax returns for the PA. From a tax point of view, this reclassification could eventually cancel certain elections and render certain expenses non-deductible, especially under tax rules. As a protective measure, the partnership agreement should provide that, regardless of the date of the transfer of interest, the family physician is treated as the owner of a social contribution to the tax and other purpose, regardless of the existence of a capital interest. The family physician should also submit a protective choice under section 83 (b) to mitigate the consequences of the IRS, which imposes arbitrary periods of vesting. If the LPA model is removed from the case, it provides that transferred interest payments will be suspended and fiduciary amounts will be repaid to the Fund. With regard to the distance without cause, the LPA model offers an option for an automatic reduction in the interest rates incurred for investments made before the move (and that the family doctor does not benefit from transport for investments made after the moving date), subject to GP cooperation and the recovery rules still in force. The LPA model also requires LPAC authorization for all affiliate transactions, even if they are arm-length, to ensure informed consent to conflicts of interest. In practice, we often see nuances to allow, for example, the provision of accounting or administration services by companies linked to all funds and to disclose royalties to the LPAC. ILPA wants the obligations of family physicians to be expressly strengthened in the fund documents, i.e. the obligation for the family physician to place the interests of the fund as a whole before those of a subset of investors or the family doctor himself. In addition, the compensation provision of the ILPA LPA model (which protects the family physician from the rights of a third party) excludes protection in the event of a breach of the family physician`s contract, including all vonmund letters he or she enters or any conduct that constitutes “gross negligence, fraud or intentional misconduct.” The exclusion of GP compensation for conduct that constitutes a violation of the Fund`s documents is not typical and, in our experience, it would be more common for the family physician to lose compensation protection in the event of a substantial breach.

We have made available a sample of these LPA model provisions, which we believe will be of interest to fund managers, sponsors and investors, as well as our comments. For interest rate calculations for which a credit facility is available, the preferential return should be obtained from the date on which the capital is threatened, i.e. when the credit facility is used, and not when the capital is ultimately called from. This repeats what is stated in ILPA Principles 3.0, as defined in the June 2017 ILPA guidelines on Denabo lines of credit. However, this is still an area that can be a challenge for family physicians.