By default, the GP manages the SCSp or SCA from a company law perspective, meaning that it enters into transactions and signs documentation on the fund’s behalf, while responsibility for risk and portfolio management rests, from a regulatory perspective, with the EU AIFM. Considering the key functions of the GP, EUFMs typically seek to maintain an appropriate level of control over the GP through ownership and representation on its board of managers . The board of managers typically comprises two Luxembourg-based managers and one manager affiliated with the EUFM, who often has veto rights over decisions. This structure seeks to balance the need for a meaningful Luxembourg footprint with the sponsor's desire to retain control over key decisions.

Organising a formal board meeting each time the GP is required to take decisions or act toward third parties is burdensome. EUFMs therefore typically rely on a representation clause in the GP’s articles. Such clause typically provides that the GP may validly represent the fund through the joint signature of one Luxembourg-based manager and the manager affiliated with the EUFM. While this facilitates execution, it may require managers to sign documentation without a specific prior board resolution approving the relevant transaction. Managers may therefore raise personal liability concerns and push back. However, in practice, they usually take comfort from the EU AIFM’s documented investment decision and their ability to adopt a subsequent board resolution ratifying the transaction. To avoid managers being taken by surprise, it is essential to align in advance on the process and on the expectations of the Luxembourg-based managers.

To further facilitate deal execution and investor onboarding, the GP may also grant a power of attorney to specific representatives of the EUFM who are close to the deal team. While operationally efficient, systematic decision-making or execution from the EUFM’s  jurisdiction may create a taxable footprint there and may cast doubt on the fund’s Luxembourg corporate domicile. Powers of attorney should therefore be used with great care.

Ultimately, the governance arrangements must be carefully calibrated with the proposed board members, with decision-making process and signing authority clearly documented and operationally workable.

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