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In the dynamic landscape of the private equity and venture capital  sector, the role of an in-house counsel extends far beyond mere advisory duties and handling negotiations during the investment stage. Contrary to common perception, the significance of in-house legal counsel begins at the inception of the fundraising process. This early involvement of in-house legal counsel in the fundraising process is pivotal, as it yields manifold benefits and significantly influences the trajectory of success at every juncture. Let's delve into some of the key multifaceted contributions of in-house counsel at each stage of the fundraising process.

Crafting of fund terms and structure

As fund managers meticulously craft their investment strategy, in-house counsel assume a pivotal role in shaping the fund's structure and terms. Leveraging their nuanced understanding of the organisation's objectives and operational dynamics, in-house counsel collaborate closely with key stakeholders to finalise critical aspects such as the fund's structure - whether a unified or a co-investment structure, and the jurisdiction of the fund or its feeder, depending on the targeted investors' type and residence. Additionally, they assist in formalising key terms such as the tenure of the fund, investment concentration limits, and other essential parameters while ensuring strict adherence to regulatory requirements. Drawing from their experience and analysing any prior fund documents of the organisation, the in-house counsel tailors the fund's terms to resonate with both regulatory mandates and the commercial preferences of the fund manager and potential investors. This strategic alignment not only expedites the fundraising process but also optimises resource utilisation, sparing the need to embark on a fresh start.

Liaising with external fund counsel for the drafting of fund documents

Once the fund's internal framework gains unanimous approval, the in-house counsel embarks on a collaborative endeavour with external legal advisors to draft essential fund documents. These encompass crucial documents such as the private placement memorandum, shareholders' agreements, subscription agreements, and constitution documents, which lay the foundation for the fund's operations. Acting as a link between internal stakeholders and external counsel, the in-house counsel ensures a delicate balance is struck between the fund manager's commercial objectives and the regulatory constraints imposed by relevant authorities. Drawing upon their experience, contemporary market dynamics, and insights from prior funds managed by the organisation, the in-house counsel preemptively identifies issues commonly encountered during negotiations with targeted investors. This foresight facilitates the proactive integration of solutions into definitive documents by external counsel, forestalling potential hurdles and amplifying investor confidence.

Registering the fund with regulators

 

Navigating the regulatory landscape is another key responsibility of in-house counsel. They serve as a central point of contact for internal stakeholders, streamlining the process of collating necessary documents for the registration of the fund, where required. This involves coordinating with various departments within the organisation to gather essential information and paperwork efficiently. Once the documentation is compiled, in-house counsel becomes the liaison with external legal counsel, facilitating seamless communication and ensuring compliance with registration requirements.

Drafting of the pitch deck and marketing the fund

In-house counsel also closely collaborate with the management team on crafting the fund's pitch deck and oversees their marketing efforts. Leveraging their legal expertise, they ensure that the pitch deck complies with securities laws and regulations, meticulously reviewing its content for accuracy, completeness, and adherence to disclosure requirements. By minimising legal risks associated with marketing materials, in-house counsel facilitates effective communication of the fund's value proposition to potential investors. Throughout the fundraising process, they also guide marketing activities and investor communications, ensuring that all materials and communications adhere to securities laws, anti-fraud regulations, and marketing guidelines. By conducting legal reviews of marketing materials, in-house counsel mitigates the risk of misrepresentation or non-compliance, ultimately bolstering investor confidence and trust.

Conducting diligence on targeted investors

Conducting diligence on targeted investors involves assessing the suitability of potential investors by thoroughly examining their source of funding, entity structure, beneficial ownership details, and more. In-house counsel meticulously review investor qualifications, subscription agreements, compliance documentation, and any potential conflicts of interest. By conducting comprehensive due diligence, in-house legal counsel helps ensure that the fund attracts investors who align with its investment strategy, risk tolerance, and long-term objectives.

Finalising fund documents based on negotiations

In the concluding phase of fundraising, in-house counsel leads the process of finalising fund documents based on negotiated terms. Throughout the negotiation process, they evaluate the fund's capacity to adhere to investors' terms, drawing attention to any requests from investors to internal decision-makers for thorough consideration. Additionally, they implement necessary safeguards to protect the fund manager's interests, which may entail devising a comprehensive task plan to ensure ongoing compliance with the terms negotiated by investors for the duration of the fund's lifecycle.

 

 

About the author

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Rini Mitra serves as the general counsel at Evolvence India, an investment platform focused on private markets in India. Rini brings over 13 years of expertise in fund formation, investment platform setup, M&A, private equity transactions, deal-making, and corporate and commercial advisory. Her previous roles include positions at esteemed law firms and investment fund houses such as Cyril Amarchand Mangaldas and IDFC Alternatives.

 

 

ALB is soliciting articles from in-house counsel based in India for its bi-monthly e-magazine. For submission guidelines, email nimitt.dixit@tr.com.

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