Private Equity Newsletter
June 29, 2016
This edition of Dechert’s Private Equity Newsletter reviews recent developments in private equity worldwide, including:
- New Proposed Regulations Increase Scrutiny on Related-Party Debt
- Estate Planning Opportunities with Interests in Private Equity Funds
- More Egregious Aggregation Under ERISA in the Sun Capital Partners Case? The District Court Goes Down Yet Another Road
- Recent Developments in Acquisition Finance
- What Fund Investors Should Know About U.S. Bank Control Rules
- LBO & Management Packages In France: Are Recent Developments In The Practice Driven By Tax Considerations?
- Designing Privacy Policies and Identifying Privacy Risks for Financial Institutions, A Webinar Presented by Dechert LLP
New Proposed Regulations Increase Scrutiny on Related-Party Debt
New rules recently proposed by the U.S. Treasury Department and the Internal Revenue Service would re-characterize purported debt instruments as equity instruments, and could have significant implications for private equity investors and their portfolio companies. While proposed as part of Treasury’s continuing war on inversion transactions, the proposed rules have a much broader impact. Private equity investors need to be aware of these rules so that they are not unexpectedly caught up in them.
Estate Planning Opportunities with Interests in Private Equity Funds
Typically, the sponsors of private equity funds are consumed with the fundraising process and the initial launch of the fund, and little attention is devoted to the estate planning opportunities that may be best exploited at the beginning of the life of the fund. Interests in private equity funds, especially the carried interest, are particularly good assets to transfer for estate planning purposes because of their significant potential for appreciation.
More Egregious Aggregation Under ERISA in the Sun Capital Partners Case? The District Court Goes Down Yet Another Road
The recent opinion by the U.S. District Court for the District of Massachusetts on remand from the U.S. Court of Appeals for the First Circuit in the Sun Capital Partners case may be troubling to private equity funds and other investment funds that invest in portfolio companies with significant liabilities under the Employee Retirement Income Security Act of 1974 (“ERISA”).
Recent Developments in Acquisition Finance
Private equity sponsors should be aware of two recent court decisions. One involves fiduciary duties under state law that may be owing to a limited liability company borrower by its managers, in the context of receivables financing facilities or other asset-based lending transactions involving the use of special-purpose vehicles. The other involves certain implications of governing-law choices under acquisition financing and related agreements.
What Fund Investors Should Know About U.S. Bank Control Rules
Many private equity, hedge and mutual funds constantly have to confront the complex control rules that may impact even the smallest of investments in banks or bank holding companies (BHCs). The issue may be as simple as avoiding acquiring more than 10% of a BHC through the aggregation of all investments in that BHC by a number of commonly advised funds.
LBO & Management Packages In France: Are Recent Developments In The Practice Driven By Tax Considerations?
The management packages offered to managers in LBOs can sometimes be differentiating factors for financial sponsors enabling them to win a competitive process for the acquisition of a target company. Because the manager plays the role of both an investor and an employee, the French tax authorities try to tax the management package as a bonus rather than as a capital gain. Due to this uncertainty, some key elements of the management package must be carefully analyzed when a management package is offered to managers.
Designing Privacy Policies and Identifying Privacy Risks for Financial Institutions, A Webinar Presented by Dechert LLP
Financial institutions, including private equity firms, should have appropriate privacy and information security programs in place. But what should those programs look like? In this webinar, attorneys from Dechert’s Data Privacy and Cybersecurity Group discussed the privacy issues faced by private equity and other financial institutions in the U.S. and broke down the complex privacy regulations into a list of components that these firms need to have in place.
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