Gain a better understanding of a sponsor's 'carried interest' and explore how preferred returns are commonly calculated.
A key aspect of a private equity fund is the sponsor promote or carried interest, which is the sponsor's disproportionate share of profits in a deal above a predetermined (or preferred) return threshold. Relative to amounts invested, once the preferred return threshold has been met, residual cash flow distributions typically favor the sponsor. In general, the sponsor's carry is calculated on either a 'deal by deal' or a 'whole fund' basis. However, within this simple binary choice, there are myriad variations, any one of which can significantly alter the returns to sponsors and investors. This topic will define the sponsor's carried interest and explore the variations for structuring the carried interest. In addition, this material will address different structures and related security arrangements of sponsor clawbacks, which protect investors from sponsors receiving carried interest they have not earned. Finally, this information will address other tax considerations that pervade all fund agreements and can impact sponsor and fund returns, such as fee waivers and tax distributions.
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Agenda
Waterfall Structures
- Whole Fund vs. Deal by Deal
- Partner by Partner vs. Aggregated
- Defining Dispositions
Clawbacks
- Mechanics
- After-Tax Calculation and Pending SEC Rule
- Interim Clawbacks
- Security for Clawback
Other Tax Considerations
- Fee Waiver
- Capital Accounts
- Tax Distributions
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Why Lorman?
Over 37 years and 1.4 million customers worth of experience providing continuing education. Our passion is providing you world-class training to help you succeed in business and as a professional.
Credits
OnDemand Course
This course was last revised on May 2, 2023.
Call 1-866-352-9540 for further credit information.
- AIPB 2.0
- This program is acceptable for 2.0 CPEC(s) towards the CB designation through the American Institute of Professional Bookkeepers (AIPB).
- AK CLE 1.5
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- AL CLE 1.8
- This course or a portion thereof has been approved by the Alabama State Mandatory Continuing Legal Education Commission for a maximum of 1.8 hours credit.
- AR CLE 1.5
- This course has been approved for 1.5 hours of CLE by the Arkansas CLE Board.
- Arizona CLE 1.5
- The Arizona State Bar does not pre-approve or pre-certify MCLE programs. However, records of this program and attendance will be maintained by Lorman Education Services for auditing purposes. This activity may qualify for up to 1.5 hours toward your annual CLE requirement for the State Bar of Arizona.
- CA MCLE 1.5
- Lorman Education Services is a State Bar of California approved MCLE sponsor and this course qualifies for 1.5 CLE hours of participatory credit.
- CT CLE 1.5
- Neither the Connecticut Judicial Branch nor the Commission on Minimum Continuing Legal Education approve or accredit CLE providers or activities. This course has been approved for CLE credit in jurisdictions aside from CT and therefore it automatically meets the content and delivery requirements in Connecticut. Credit is based on a 60 minute credit hour and shall be awarded as follows: 1.5 CLE credit(s).
- GA CLE 1.5
- This program has been approved by the Georgia Commission on Continuing Lawyer Competency for 1.5 CLE hours.
- HI CLE 1.75
- This program was approved by the Hawaii State Board of Continuing Legal Education for 1.75 CLE credit hours.
- IL CLE 1.75
- This course was approved for a total of 1.75 hours of MCLE Credit by the Illinois MCLE Board.
- MO CLE 2.0
- This course qualifies for self-study CLE credit in Missouri.
- ND CLE 1.75
- North Dakota CLE policy does not allow for pre-approval of any self-study courses. This course may qualify for up to 1.75 hours of CLE credit.
- NH MCLE 1.8
- NH MCLE does not approve or accredit CLE activities for the NH Minimum CLE requirement. Lorman Education Services believes this Ondemand course meets the requirement of NH Supreme Court Rule 53 and may qualify for CLE credit(s). Program Length: 107 Minutes.
- NM CLE 1.7
- This program has been approved by the New Mexico Minimum Continuing Legal Education Board for 1.7 hours of credit.
- NV CLE 1.5
- This program has been approved by the Nevada Board of Continuing Legal Education for 1.5 CLE hours.
- NY CLE 2.0 including Areas of Professional Practice 2
- This course has been approved in accordance with the requirements of the New York Continuing Legal Education Board for up to a maximum of 2.0 credit hours in the area(s) of Areas of Professional Practice for 2.00 hours. Each hour may be counted only as satisfying one category of credit. Duplicate credit for the same hour of instruction is not permitted. This course qualifies for both established and newly admitted attorneys. Lorman Education- Noggin Guru, Inc. has a financial hardship guideline. Please contact customer service at 1.866.352.9539 for instructions on how to apply.
- PA CLE 1.5
- This Distance Learning program has been approved by the Pennsylvania Continuing Legal Education Board for 1.5 hours of substantive law, practice and procedure CLE credit.
- RI CLE 2.0
- This program has been approved by the Rhode Island Mandatory Continuing Legal Education Commission for 2.0 hours of CLE credit.
- VT CLE 1.5
- This self-study program has been approved by the Mandatory Continuing Legal Education Board of Vermont for 1.5 hour(s) of CLE credit. Please note: Attorneys may only claim 12 credits per compliance period in this format. This course is considered "Non-Moderated Programming without Interactivity".
- WV MCLE 2.0
- This program has been approved by the West Virginia State Bar MCLE Commission for 2.0 MCLE hours.
Enrolled Agents 2.0
- In accordance with the standards set forth in Circular 230 section 10.6, CE credits have been granted based on a 50-minute hour. This program qualifies for 2.0 Continuing Education Credit(s) for enrolled agents.
To earn each credit Lorman offers through the OnDemand learning platform, you need to watch 100% of the program. Also, for certain credits you will need to fulfill additional requirements which will be displayed on the "credits" tab when viewing the course.
This program does NOT qualify, nor meet the National Standard for NASBA accreditation.
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Why Lorman?
Over 37 years and 1.4 million customers worth of experience providing continuing education. Our passion is providing you world-class training to help you succeed in business and as a professional.
Faculty
Tom Geraghty
DLA Piper LLP (US)
- Partner, DLA Piper LLP (US), Chicago
- Extensive experience in advising clients on structuring and tax aspects of complex domestic and cross-border business transactions, including mergers and acquisitions (including SPAC and up-C structures), joint ventures, public and private offerings of securities, debt and equity restructurings, real estate transactions, the organization and operation of investment funds, and investments in cryptocurrency and digital assets
- Member of the American Bar Association
- J.D. degree, Senior Editor, Yale Law Journal, Yale Law School; B.A. degree, summa cum laude, St.John’s University
- Can be contacted at [email protected] or 312-368-7075
Nathaniel Marrs
DLA Piper LLP (US)
- Partner and co-head of investment funds practice, DLA Piper LLP (US)
- Represents domestic and international fund sponsors in a variety of corporate transactions, including fund formations and investments, investment management M&A transactions, and GP/management company formations
- Authored a variety of articles for different publications addressing real estate-related topics, including PREA, the Real Estate Finance Journal and the Financial Times
- Regular speaker at Northwestern Law School and Northwestern Kellogg School of Management
- Ranked by Chambers USA and Global, and The Legal 500 in Fund Formation
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Why Lorman?
Over 37 years and 1.4 million customers worth of experience providing continuing education. Our passion is providing you world-class training to help you succeed in business and as a professional.
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