Scenario 15

---
name: draft-lpa-scenario-15
task_id: funds-asset-management/draft-lpa/scenario-15
description: Draft a new fund limited partnership agreement by adapting a general precedent to a minority-stake investment strategy, revising governance and investment provisions that assume control positions, and integrating supplemental investor requirements and governance mechanics.
activates_for: [planner, solver, checker]
---

# Skill: Draft Minority-Stake Fund LPA — Strategy-Driven Precedent Adaptation

## 1. Subject-matter triage

- Treat the precedent, term sheet, and supplemental materials as a single operative drafting set, with the precedent as the base document and the other materials as binding inputs for deviations.
- Before drafting, identify whether the precedent assumes a control-buyout model, and map each control-based assumption to a minority-stake equivalent or deletion.
- Preserve the fund’s core commercial architecture unless a supplemental instruction expressly overrides it; do not “simplify” by dropping negotiated governance, economics, or investor protections.
- If multiple supplemental materials conflict, resolve them by hierarchy, then by specificity, then by the latest signed or circulated instruction reflected in the source set.

## 2. Failure modes the skill is correcting

- Drafter carries forward control-investment assumptions from the precedent without recognizing that a minority-stake strategy requires materially different drafting throughout.
- Drafter treats key person suspension mechanics as a binary on/off switch rather than specifying what the GP may and may not do during the suspension period.
- Drafter omits investor-specific requirements introduced by supplemental letters or investor counsel comments, treating those documents as informational rather than contractually operative.
- Drafter does not address the recycled capital fee base issue, either omitting the provision or allowing double-counting.
- Drafter answers with a discussion outline instead of producing the operative LPA text requested as the primary deliverable.
- Drafter leaves “standard form” language untouched where the facts require minority-stake governance, portfolio-company rights, or compliance mechanics tailored to the strategy.

## 3. Legal frameworks / domain conventions that apply

**Minority investment strategy — investment objective and powers:** A fund investing in minority stakes should describe a minority-stake mandate. GP powers should be limited to rights consistent with minority ownership, such as negotiating contractual governance rights, board observer or board seat rights, information rights, and veto rights over specified major decisions, rather than outright operational control.

**Fund powers and delegated authority:** Draft the GP’s authority to align with limited partnership law and the partnership agreement’s internal governance scheme, including consent thresholds, advisory committee mechanics, and reserved matters. Avoid language that suggests the fund itself exercises corporate control over portfolio companies absent a specific negotiated right.

**VCOC qualification — minority investment management rights:** If ERISA plan investor participation makes VCOC status relevant, the fund should be structured to negotiate contractual rights to participate in the management of portfolio companies and to exercise those rights at least annually. The LPA should include a provision obligating the GP to pursue management rights letters with portfolio companies and to exercise those rights annually where required by the fund’s compliance framework.

**Key person suspension — permitted activities:** When a key person event triggers suspension of the investment period, specify what the GP may do during suspension, such as follow-on investments in existing portfolio companies where the fund has an existing commitment and the required LPAC approval is obtained, and ordinary-course fund expenses. Also specify what the GP may not do, such as making new platform investments.

**Key person replacement — advisory committee approval:** Any proposed replacement for a key person should be approved by the limited partner advisory committee or another defined investor approval mechanism before the replacement satisfies the key person requirement and the suspension is lifted. The LPA should specify the approval process and the timeline for proposing and approving a replacement.

**Recycled capital — management fee base:** When the fund recycles realized proceeds into new investments, state how those proceeds are counted for management fee base purposes so they are not counted more than once. The drafting should make the fee-base mechanics explicit and internally consistent across definitions, capital accounts, and fee provisions.

**Negotiated investor requirements:** When an anchor investor or major limited partner provides specific drafting requirements through a side letter, counsel comment letter, or separate requirements document, review those requirements against the LPA and either incorporate them directly or address them in a side letter. Do not ignore requirements simply because they originate in a supplemental document rather than the term sheet.

**Drafting consistency:** Use defined terms consistently, preserve cross-references, and ensure any inserted minority-stake language does not break distribution, excuse, transfer, reporting, or advisory committee provisions elsewhere in the agreement.

## 4. Analytical scaffolds

- Read the precedent once as a control-document audit, not as a template to copy mechanically.
- Mark every provision that presumes control ownership, a buyout strategy, or full operational authority, then rewrite each provision for a minority-stake fund or delete it if no analogue is needed.
- Translate investment authorization language into minority-appropriate permissions, including contractual governance rights, information rights, consent rights, and participation rights.
- Draft key person mechanics as a process, not a toggle: trigger, suspension scope, permitted actions, prohibited actions, replacement proposal, approval path, and reinstatement.
- Draft recycled-capital economics so the management fee base and any recycle mechanics reconcile without double counting or hidden expansion of the fee base.
- Map each supplemental investor requirement to a home in the LPA, and where a direct insertion would distort the main agreement, route the point to a side letter only if the source materials clearly support that treatment.
- Check that every changed provision still works with the rest of the agreement: definitions must match the operative provisions, and operative provisions must match the disclosure and transfer mechanics.
- If the source set is incomplete on a point, draft a commercially reasonable placeholder that is consistent with the stated strategy and mark the issue for follow-up rather than importing an assumption from the precedent.

## 5. Vertical / structural / temporal relationships

- Align the fund’s lifecycle provisions with the investment period, follow-on period, extension mechanics, and wind-up period so the minority-stake strategy is reflected throughout the term.
- Tie any suspension of the investment period to a defined event, a defined approval body, and a defined scope of actions during the suspension.
- If management-rights or board-observer obligations are periodic, make the timing explicit and place the obligation in the correct covenant or compliance section.
- If a supplemental investor instruction affects economics, governance, or reporting, confirm whether it applies at closing, on an as-drafted basis, or only upon a later threshold being met.
- Ensure that any carve-outs for regulatory, tax, or ERISA-related purposes sit in the provisions they actually modify, not in a generic recital or catch-all section.

## 6. Output structure conventions

- Produce the operative fund LPA draft as the primary deliverable, not an outline, memo, or notes file.
- Use conventional LPA architecture: introductory matters, definitions, contributions, investment period and restrictions, management and advisory provisions, allocations and distributions, transfers, excuse/withdrawal, reporting, liability and indemnification, term and dissolution, and miscellaneous provisions.
- Keep the drafting self-contained and cross-referenced; do not rely on external explanation to make a clause operative.
- Where a supplemental requirement changes standard form language, integrate the change directly into the relevant clause unless the source materials clearly indicate a separate side-letter solution.
- Draft in clean agreement language suitable for Word output, with defined terms, operative verbs, and internal consistency.
- Ensure the final file reflects the requested agreement and contains operative clauses, not commentary about how the clause would be drafted.