Analyzing Key Person Event Provisions

Analyzing Key Person Event Provisions

When To Use

• Reviewing or drafting key person clauses in LPA, side letter, or GP agreement contexts
• Assessing management concentration risk during fund due diligence
• Evaluating whether a proposed GP personnel change triggers a key person event
• Structuring departure protections or cure mechanics for a new fund formation
• Advising LPs on the adequacy of key person protections in existing fund documentation

Inputs To Gather

• Partnership agreement (LPA) — full executed version including all amendments and side letters modifying key person provisions
• Key person list — named individuals designated as key persons, including any tiered classifications (e.g., "Category A" vs. "Category B" key persons)
• Devotion-of-time requirements — minimum time commitment thresholds (e.g., "substantially all business time," specific percentage thresholds, or exclusivity requirements)
• Trigger event definitions — death, disability, departure, cause termination, bankruptcy, regulatory disqualification, or other specified events
• Current GP personnel status — whether any key person has departed, reduced involvement, or is subject to pending investigation or health issues
• Side letter provisions — any LP-specific key person modifications, additional named persons, or enhanced trigger rights
• LPAC composition and role — whether the LP advisory committee has authority over cure, waiver, or replacement approvals

Workflow

1. Identify all key person designations — Extract the named individuals and any classification tiers. Note whether the provision uses an "all of" or "any X of Y" trigger structure. Flag if the key person list is static or subject to GP modification.

2. Map trigger events — Catalog each defined triggering event (death, disability, departure, cause, conviction, regulatory bar, bankruptcy). Assess whether "departure" includes voluntary resignation, involuntary removal, or reduction below a time threshold. Note any carve-outs (e.g., permitted board service, successor fund activity). [VERIFY] whether disability definition cross-references a specific standard (e.g., ADA, insurance policy definition, or number of consecutive days).

3. Analyze consequence mechanics — Determine the immediate consequence of a key person event:

   • Investment period suspension — new investments halted; follow-on investments may or may not be permitted
   • Investment period termination — permanent end to new deployment
   • GP removal right — LP vote to remove GP triggered
   • Fund termination right — LP vote to wind down the fund
   • Note whether consequences are automatic or require LP vote, and the applicable voting threshold (simple majority, supermajority, LPAC approval)

4. Evaluate cure and reinstatement provisions — Determine whether the GP has a cure period (typically 60–180 days). Identify what constitutes a valid cure: appointment of a replacement approved by LPAC or LP vote, reinstatement of the departed key person, or other specified remedies. Assess whether the investment period resumes automatically upon cure or requires affirmative LP consent.

5. Review replacement approval mechanics — Identify who approves replacement key persons (LPAC, LP majority, supermajority). Note whether the GP can propose replacements or whether LPs have nomination rights. Flag any veto rights held by specific anchor LPs via side letters.

6. Assess practical adequacy — Evaluate concentration risk: a fund with two key persons under an "all of" trigger is more exposed than one with an "any two of four" structure. Consider whether devotion-of-time language is enforceable and monitorable. Flag provisions that are unusually GP-friendly (long cure periods, GP-controlled replacement, no automatic suspension) or LP-friendly (hair-trigger events, no cure, automatic termination).

Output

Produce a structured analysis report containing:

• Key Person Roster — table listing each named key person, their classification tier, role, and time commitment requirement
• Trigger Event Matrix — grid mapping each key person to each trigger type, noting whether the event applies and any carve-outs
• Consequence Summary — description of what happens upon trigger, including whether consequences are automatic or vote-dependent, with applicable thresholds
• Cure Mechanics — cure period duration, permissible cure actions, approval requirements for replacements, and reinstatement terms
• Risk Assessment — concentration risk rating (high/medium/low), identification of GP-favorable or LP-favorable deviations from market terms, and flagged gaps or ambiguities
• Side Letter Overlay — any LP-specific modifications that alter the base key person framework
• Recommendations — specific suggested revisions, additional protections, or negotiation points depending on whether the client is GP-side or LP-side

Quality Checks

• Confirm every named key person in the LPA is accounted for in the roster, including side letter additions
• Verify trigger definitions are quoted or closely paraphrased — do not paraphrase loosely enough to change meaning
• Cross-check cure period lengths against market norms (typically 90–180 days for institutional funds) and flag outliers
• Ensure consequence mechanics distinguish between suspension and termination of the investment period — these have materially different economic impacts
• Confirm voting thresholds are accurately stated, including whether they are measured by commitments, interests, or headcount
• [VERIFY] applicable state partnership law default rules that may fill gaps where the LPA is silent on key person mechanics
• Flag any circular or internally inconsistent provisions (e.g., a cure requiring LPAC approval when the LPAC composition itself depends on the departed key person)