Can I change my fund's documents after investors join?
Advanced · Video 16 of 16 · 0:37 ·
Before any investors join, usually yes. After, the operating agreement's amendment clause controls: changes that hurt investors usually need their consent, by a stated majority or sometimes each investor affected. Changes that only help investors are easier but still go in writing with notice. Every document has to match, the operating agreement, offering memorandum and side letters, and the operating agreement usually controls if they conflict, so amend it first.
Everything here is for educational purposes only and is not legal, tax or investment advice, or an offer to buy or sell any security. Laws and thresholds change and depend on your facts, so talk to a qualified attorney before acting.
Key facts
- Before the first close, the manager can usually revise the documents.
- After launch, the operating agreement's amendment clause decides how terms change.
- Adverse changes typically require investor consent.
- Changes must be consistent across the operating agreement, offering memorandum and side letters.
- The operating agreement usually controls conflicts.
Transcript
Founder: I want to raise my fund's fees. Can I just update the document?
Operator: Before any investors join, usually yes. After, the operating agreement decides.
Operator: It says how it can be amended. Changes that hurt investors usually need their consent: a majority, or sometimes each investor affected.
Founder: And if I lower fees instead?
Operator: Changes that only help investors are easier. They still go in writing, and investors get notice.
Operator: And change it everywhere. The operating agreement, the offering memorandum and any side letters have to match.
Founder: And if they don't?
Operator: The operating agreement usually wins. So that's the one you amend first.
Founder: So I want to raise my fees...