Should I include a Key Man Provision in my LPA?
Should I include a Key Man Provision in my LPA?
For first time fund managers and solo GPs of small funds we do not recommend including a Key Man Provision in your LPA. If a prospective LP requests this provision, you can incorporate it into the LPA. A Key Man Provision is unfavorable to the GP but there are ways to water it down. For example, you could require unanimous LP consent to trigger the Key Man Provision. You could also build in a remedy period so that you can fix any issues that led to the Key Man Provision being triggered.
Key man provisions are typical for fund that rely on the skill and expertise of particular key individuals. The Cornerstone provides certain protections for investors relating to the key individuals. For example, if all Key Individuals are Incapacitated, the Fund automatically enters Limited Operations Mode.