There is usually **no exact legal line based on poor returns alone**. In most VC funds:
- **Poor performance** by itself usually does **not** justify GP removal.
- **Malfeasance** depends on the **LPA definition** and often requires serious conduct such as:
- fraud
- bad faith
- willful misconduct
- gross negligence
- violation of law
- breach of the LPA
In the Cornerstone Start Agreement, **Malfeasance** is defined only if determined by a **final non-appealable court judgment**. So the practical threshold is not “bad investing,” but **proven misconduct** under the contract.
For LP clawbacks or GP removal, always check the exact LPA language, vote thresholds, notice, and cure provisions.
References:
-
https://decilehub.com/base/1-general_questions/28283-what-is-the-cornerstone-start-agreement
- https://decilehub.com/base/1-general_questions/163683-when-can-the-gp-be-removed
