Private equity has sometimes been described as a veritable candy shop for lawyers with an interest in corporate law. We agree that both the structuring of the funds in which private equity is held, and the investments made by those funds are interesting for a variety of reasons. In this contribution, we discuss the final stage of a private equity fund: its dissolution and liquidation, and in particular that of private equity funds structured as a Dutch limited partnership (commanditaire vennootschap) (Limited Partnership). 

Private equity funds are generally of a so-called closed-end nature: investors in the fund cannot have their interest repurchased or redeemed (at least during the first five years of the term). On the other hand, closed-end private equity funds have a predetermined, limited term. Investors therefore know for how long their interest is ‘locked in’ to the fund – leaving aside any possibilities for transferring this interest. This means that it is clear in advance when the fund will end and that the dissolution and liquidation of the fund thus form an essential part of the fund’s profile and lifecycle.

For decades, the LP has been the most commonly used legal form for Dutch private equity funds. As the Dutch equivalent of the American (Delaware) limited partnership, the Limited Partnership is a familiar legal form to both Dutch and foreign investors. Dutch partnership law is largely of non-mandatory law, which means that the Limited Partnership can be structured in a more flexible manner in many respects than Dutch companies limited by shares. The manager of the private equity fund, within the meaning of Section 1:1 of the Dutch Financial Supervision Act (or a subsidiary of that manager), is then the general partner of the Limited Partnership, and the investors in the fund are the limited partners; the Limited Partnership agreement also serves as the fund agreement for the private equity fund.

However, tax considerations are usually decisive when choosing the legal form of a private equity fund. The possibility of tax transparency offered by the Limited Partnership was long the decisive factor in this regard. In recent years, however, the Dutch cooperative (coöperatie) has increasingly been chosen as the legal form for Dutch private equity funds. In our experience, private equity funds whose term is now expiring were often set up as Limited Partnerships in the past. As a result, the dissolution and liquidation of the Limited Partnerships will remain relevant for the time being.

In this publication, we examine, from the perspective of private law and the related financial supervisory law, the term and dissolution, the assets, the liquidation, the distribution, the termination of a private equity fund Limited Partnership and the possible modernisation of Dutch partnership law.

The full publication is available in Dutch.

This publication was first published in WPNR - Opmaat.sdu.nl

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