Tax aside? Private investment fund side letters

In this article we examine the increasing use of side fund letters in a private investment funds context and the associated most favoured nations (MFN) process. We consider the tax provisions being used in side letters and suggest two developments (one tax-specific and one more general) which we consider will make the side letter negotiation and MFN process more manageable and ultimately less costly.

Side letters in a private investment fund context

Side letters are a contractual means by which fund managers can grant rights to investors which supplement amend or supersede the terms of a fund’s primary governing documents or otherwise limit the applicability of specified terms in respect of investors.

Investors naturally wish to...