How to Track a Defaulting LP After a Call Is Missed

How to track a defaulting LP is the LPA default overlay you open after a capital call is missed: notice date, cure period, remaining unfunded commitment, interest or penalties copied, forfeiture or forced sale of the interest, and whether the GP declared a default. It is not the remaining commitment itself. Raziel's unfunded commitment tracker is the remaining-capacity row. Raziel's capital call tracking guide is the wire and the notice. This page is the default row on a missed Due Date.

This is not legal, tax, or investment advice. Raziel does not provide it. Copy the LPA, the Default Notice, and any later GP letter. Do not invent a default rate. ILPA and law-firm fill-ins below are models. Your document may differ.

What the default overlay is (missed call, not remaining unfunded)

Dentons (25 May 2023): if an LP fails to make all or any portion of a capital contribution within the prescribed period after a capital call notice, that LP has defaulted, and the sponsor can use LP Agreement remedies, in some cases only after a cure period expires. The ILPA Model LPA (whole of fund, July 2020) Section 6.6.1: if a Partner fails to make a required Capital Contribution or other amount, the General Partner shall send a written Default Notice. If the failure continues for [five (5)] Business Days after receipt, the Partner is designated a Defaulting Partner. Five Business Days is a model fill-in. The same section lets the GP skip that designation and waive or permit a cure. A missed Due Date is not automatically a declared default. Excuse is a different row. Raziel's excuse rights tracking page is a permitted skip of a named investment under Section 6.7. The Model LPA treats an Excused Limited Partner as not a Defaulting Partner on that contribution.

Seven columns on one missed-call row

Open one row per missed call, per LP interest, per vehicle. Copy each field from the Drawdown Notice, the LPA, the Default Notice, and any later GP letter. If a field is missing, store that it was missing.

• Call due date and amount unpaid. Due Date and unpaid amount from the Drawdown Notice. Model LPA Section 6.2.1: a Drawdown Notice at least ten Business Days prior to the Due Date (a model fill-in). Store the date and the unpaid amount in the notice currency.

• Default notice date. Date the Default Notice was received (or sent, if receipt is not stated). Cooley (TheFundLawyer, 21 August 2020): typical venture fund agreements require a formal notice of default letter and 10 or 20 days of cure time. Store the date you can prove.

• Cure period copied. The window after the Default Notice. ILPA Model LPA and the July 2020 whole-of-fund term sheet: [five (5)] Business Days after receipt. Cooley: usually 10 or 20 days. Copy your LPA. Do not paste five, 10, or 20 unless the document says so.

• Remaining unfunded commitment. Ending remaining obligation after the missed call, including the unpaid amount if it is still live. This is the remaining-capacity figure on Raziel's unfunded commitment tracker. Model LPA Section 6.6.5: so long as a Defaulting Partner is a Partner, Remaining Commitment still has to be paid.

• Interest or penalty copied. Rate, start date, and what it applies to. Model LPA Section 6.6.3 and the term sheet: unpaid amounts accrue interest at [10]% per annum from the Due Date until paid, plus Damages. Ten percent is a model fill-in. Mayer Brown (29 October 2024): the GP may charge a punitive rate until paid. Copy the rate.

• GP declared default (yes, no, or date). Whether the GP designated the Partner a Defaulting Partner, and on which date. Model LPA Section 6.6.2: the GP informs Limited Partners of the Default and of any action taken within [thirty (30)] days of that designation (a model fill-in). A Default Notice is not a designation.

• Remedy used (forfeiture, forced sale, reduced commitment, none yet). Which remedy the GP actually used. Model LPA Section 6.6.4 (GP discretion, any order): withhold or forfeit distributions to offset the defaulted amount; sell the Interest for [50]% of the lesser of aggregate Capital Contributions or Value; forfeit up to 100% of the Interest without payment; or reduce Commitment to Capital Contributions already made (net of distributions). Mayer Brown lists overcall, forced sale at a reduced amount (it illustrates a 50% discount), and capital-account cram-down. Dentons adds a subsequent call on non-defaulting LPs (typically capped). Cooley: remedies are not mutually exclusive. Store the remedy named in the letter, or store none yet.

Notice, cure, and designation are three dates

A Due Date can pass without a Default Notice. A Default Notice can expire without a designation. The Model LPA lets the GP skip the designation and waive or permit a cure. Cooley: the choice to enact remedies, and the timing, is typically at the manager's discretion. Do not treat "missed" as "declared." Copy the three dates or store that a later date never arrived.

When the row holds

The row holds if the unpaid amount is the notice amount, the cure period is copied from the LPA, remaining unfunded is still a live figure (or a later reduced-commitment amount you stored as the remedy), interest is a copied rate, and GP-declared-default is yes, no, or a date. It fails when you invent a default rate, paste ILPA's five Business Days or 10% as yours, fold this overlay into remaining unfunded, or treat an excuse as a default. Raziel's IRR calculator is a free money-weighted return tool. Raziel does not give legal or investment advice. Copy the seven columns. Leave the clause to the LPA.