Private Funds Law Definition
"Private Funds Law" references domestic or international debt and/or equity higher risk/return investments in structures not listed on public stock exchanges. Common subsets include "private equity" and "hedge fund"; typically, illiquid investments. The governing law of the investment structure (or parts of the structure) determines the extent to which the investment or its investor(s), sponsor, manager(s), and advisor(s) are regulated or must comply with specific investor-protection or other legal requirements.
Depending on the nature of her client(s) (likely, high net worth and investment sophisticated), with a role either as investment sponsor/advisor/manager of, investor in, financier, or vendor to or acquirer from the structure, and the location(s) of the investment, the demands placed on the business lawyer will likely be broad. The lawyer will require both expansive and highly-specific, legal, business, and industry knowledge and expertise, with strong negotiation and implementation skills. In Canada, many private fund investors may be taxable or tax-exempt and funded by sizeable pension plans, insurance companies, foundations, workers' compensation, or other public or private collective structures (often referred to as institutional investors). This often requires even more specific legal knowledge and experience, in areas such as tax, pension, charity, public sector, information, and privacy laws.
Clients should seek out counsel with significant experience with limited partnerships and other limited liability structures, corporations, governance, other aspects of fund formation, financings, restructurings and exits, mergers and acquisitions, and securities, investment, or other industry or fund-specific regulation, and depending upon the investment targets, often in more than one jurisdiction. It is not unusual for some complex international investment structures to span multiple jurisdictions, where the initial investment may be made in a collective vehicle in one country (typically a limited partnership or LLC), with subsidiary entities in other countries and the ultimate investment target(s) residing yet elsewhere. Investor legal advice often focuses on minimizing the legal aspects of investment risks, addressing liquidity, exit opportunities, investment oversight and control, capital exposure and unfunded capital, sponsor/manager/advisor reliance, compensation (usually with carried interests, hurdles, and promotes), and alignment of interests. Often depending on the amount to be invested relative to the total capital required, the investor will seek to settle upon a terms that offer an acceptable balance of oversight, control, and reliance upon others.