Do you have to pay a capital call?

In any instance, a request for capital usually isn’t optional. The investor committed to a certain amount of money when the agreement was signed, so they’re expected to pay their share. The agreement will specify what the repercussions are for a partner not making their contribution.

What is a capital call transaction?

A “capital call” or “draw down” transaction occurs in the context of private equity and venture capital investments. It is the legal term for the scenario where an investment firm asks for the capital already committed to it by an investor to provide the funds – usually when an investment deal is due to close.

What is a capital call in an LLC?

A “capital call” describes a situation where the partnership or LLC requires its partners or members to make one more or more additional, mandatory contributions of capital, after their initial capital contribution.

What happens if you can’t make a capital call?

An LP who can’t meet a capital call is considered in default and is potentially subject to penalties and legal liability. Generally, the fund manager determines which penalties outlined in the LPA, if any, to apply in any particular situation.

What happens if you miss a capital call?

What is GP catch-up?

In apartment syndications, the General Partner (GP) catch-up is a distribution to the GP such that they have received their full portion of the profits. The GP catch-up is relevant when the compensation structure of partnership between the GP and the Limited Partner (LP) includes a profit split.

What is a capital waterfall?

A distribution waterfall describes the method by which capital is distributed to a fund’s various investors as underlying investments are sold for gains. Essentially, the total capital gains earned are distributed according to a cascading structure made up of sequential tiers, hence the reference to a waterfall.