Compare Fund Term Sheet Against Side Letter Terms

---
name: compare-fund-term-sheet-side-letter
task_id: corporate-ma/compare-fund-term-sheet-against-side-letter-terms
description: Guides deviation analysis between a fund term sheet and an LP side letter, identifying MFN cascade effects, structural impossibilities, capital account distortion risks, and disclosure tension for public-entity LPs.
activates_for: [planner, solver, checker]
---

# Skill: Compare Fund Term Sheet Against Side Letter Terms

## 1. Subject-matter triage

- Treat the task as a side-by-side deviation review of a fund term sheet and a side letter, not a general fund formation summary.
- First identify each side letter term that departs from the baseline economics, governance, transfer, confidentiality, or operational mechanics in the term sheet.
- Group terms by affected party and mechanic before drafting conclusions so MFN, enforceability, and disclosure issues are assessed on the correct universe of deviations.
- If the source set includes multiple investors, multiple MFN clauses, or multiple election pathways, enumerate them before analysis and do not collapse them into a single representative investor.

## 2. Failure modes the skill is correcting

- Identifying a deviation without assessing whether the same favorable treatment could be claimed by other investors through MFN rights or similar election rights.
- Treating an LP-specific right as standard without testing whether the relevant mechanic is actually fund-level and therefore structurally awkward or unenforceable as written.
- Missing the way a fee, carry, recycling, or preferred-return change can alter waterfall economics beyond the named recipient.
- Overlooking that a transfer right may be constrained by the transferee’s own investment policies, approval conditions, or operational limits.
- Failing to spot tension between confidentiality language and mandatory disclosure regimes applicable to governmental or public-entity LPs.
- Concluding on a deviation in the abstract without tying it to the governing term sheet language, the interacting side letter provision, and the practical consequence for the client.

## 3. Legal frameworks / domain conventions that apply

- MFN rights in private fund side letters: analyze whether a favorable term falls within the scope of any MFN grant, whether election mechanics are triggered, and whether the cascade is limited by investor class, timing, or subject matter.
- Fee and carry economics: assess how the deviation changes the recipient LP’s economics and whether related adjustments are needed elsewhere in the waterfall or capital account mechanics.
- Preferred return, distribution priority, and carry modifications: test whether the side letter changes the ordinary allocation framework or creates inconsistent treatment across investor classes.
- Recycling provisions: assess whether differential recycling treatment changes capital exposure over multiple investment cycles or distorts pro rata allocation mechanics.
- Fund-level governance and operational rights: analyze co-investment, suspension, key person, removal, excuse, and transfer rights against the collective structure of the fund.
- Public records and disclosure law: if the LP is a governmental or public entity, evaluate whether disclosure obligations may override confidentiality language under the applicable public-records regime and related exemption doctrine.
- Transfer and successor-investor constraints: if the side letter permits transfers, consider whether the transferee’s policies, regulatory status, or approval conditions affect acceptance or ongoing administration.
- General enforceability principles: identify structural conflicts, impossibility concerns, consent requirements, and inconsistency with the fund’s expressed mechanics under the controlling organizational documents and applicable contract law.

## 4. Analytical scaffolds

- Start with a deviation inventory and analyze each deviation separately; do not merge distinct economic, governance, disclosure, and transfer issues into one summary paragraph.
- For each deviation, state:
  1. the baseline term in the fund term sheet,
  2. the side letter deviation,
  3. the affected mechanic,
  4. the client consequence, and
  5. any required follow-on analysis under MFN, enforceability, or disclosure rules.
- For any economic term, identify the direction of change, the class of cash flow or allocation affected, and whether the change can propagate to other investors through MFN or similar rights.
- For any governance or operational right, test whether the provision can function at the LP level, the fund level, or only through a GP-administered process.
- For any transfer or consent condition, identify the relevant transferee category and the practical constraint it may create for capital acceptance or continued holding.
- For any confidentiality or public-disclosure issue, distinguish internal confidentiality language from external legal compulsion and assess the resulting drafting and process tension.
- Conclude each issue with a risk level, a short recommendation, and the downstream economic, operational, regulatory, or transaction effect.

## 5. Vertical / structural / temporal relationships

- Map each deviation to the clause hierarchy: term sheet baseline, side letter override, and any linked election, consent, or disclosure provision.
- Where a provision is investor-specific, verify whether the effect remains isolated or becomes systemwide through MFN elections, parallel side letters, or comparable rights granted elsewhere.
- Where a provision operates over time, assess whether the effect is one-time, cycle-based, or cumulative across future contribution, distribution, or recycling periods.
- Where the source documents reference a fund-level process but the side letter purports to operate at the LP level, flag the structural mismatch and explain why the mismatch matters for administration and enforceability.
- Where public records exposure is possible, assess the vertical relationship between private contractual confidentiality and mandatory disclosure obligations imposed by law.

## 6. Output structure conventions

- Produce a deviation analysis memo, not a narrative summary.
- Open with a short issues overview and a severity legend using an ordinal scale stated once at the top.
- Present each deviation as a discrete entry with: issue title, severity, baseline term, side letter change, MFN exposure, enforceability / implementation concern, and recommendation.
- For every issue, tie the analysis to the source documents, name the controlling legal or contractual principle supporting the conclusion, and explain the consequence for the client.
- Include a dedicated MFN section that identifies the investors or investor classes with potential election rights and states whether the favorable term is likely electable, partially electable, or outside scope.
- Include a dedicated enforceability section addressing any term that conflicts with fund-level mechanics, operational administration, or mandatory disclosure law.
- End with a Recommended Actions block that uses imperative verbs, identifies the responsible role, and gives a timing anchor tied to the transaction timeline or next drafting step.
- Keep the memo concise, but do not omit the operative analysis for any material deviation.