Legal & Regulatory Bulletin – Issue No. 11, Spring 2014

In the spirit of Spring, this Bulletin focuses on growth—in the diversity of fund structures available to investors; in positive reforms in West and Central Africa and in the regulation of European venture capital; and in support for fund managers when implementing environmental, social and governance (“ESG”) requirements throughout their investment processes.

We start by exploring alternative fund structures to the traditional private equity fund model. Debevoise & Plimpton’s Geoffrey Kittredge and John W. Rife III describe the attributes of a deal-by-deal fund, which allows investors to target a single opportunity rather than rely on the fund manager’s investment team to identify investments, and a pledge fund, which gives investors the right to “opt out” of investment opportunities presented by the fund manager. Kittredge and Rife highlight costs, complexities and investor protections that fund managers should consider when evaluating these models.

Mara Topping of White & Case analyses evergreen investment alternatives to the term-limited closed-end private equity structure; an investment holding company, and a subsequent subscription tranche and re-opened investment period model. Topping explains the growing attraction that the term flexibility of these models provides investors, particularly in sectors with long term horizons such as infrastructure and health.

The team at Orrick, Herrington & Sutcliffe then examines major steps taken by the 17 West and Central African states of the OHADA Treaty to improve corporate law throughout the region that will make it better suited to private equity investment. The reforms contribute to a simpler and more secure legal framework for investors and companies involved in cross-border transactions within OHADA member states, such as the Democratic Republic of Congo and Senegal. Authors Sydney Domoraud-Operi and Anthony Riley report that, while not without challenges, the law meets most of the EMPEA Guidelines for “effective, clear, and flexible securities laws” and sets the stage for further development of local capital markets in the OHADA region. We note in passing a recent public ministerial comment supportive of changes to Nigerian laws to make the country better suited to private equity investment. These are positive steps for the industry in Africa.

Next, we point readers to resources valuable to private equity industry participants with an interest in ESG. A recent report by the United Nations-supported Principles for Responsible Investment (“PRI”) provides new guidance to fund managers on how to identify, manage, and report on ESG issues throughout the investment process. We applaud this report, as well as the 130 + institutional investors and 150 private equity firms that have become signatories to PRI.

Finally, the Bulletin provides an overview on the European Venture Capital Fund Regulation (“Regulation”) by the European Venture Capital Association, a valued EMPEA partner. The Regulation permits qualifying venture capital managers to obtain a marketing passport similar to that available to larger managers under the European Union’s Alternative Investment Fund Managers Directive. We welcome this development as a simpler and more efficient process for qualifying venture capital managers to raise capital across borders within the European Union.

The Legal and Regulatory Council continues to encourage EMPEA Members to alert us to opportunities to partner with local and regional organisations to advocate improvements to regulatory frameworks throughout emerging markets. We look forward to meeting May 13th and 14th at the IFC/EMPEA Global Private Equity Conference in Washington DC, where regulatory discussions will feature prominently. As always, we await your comments and suggestions, which can be shared with Jennifer Choi at

Mark Kenderdine-Davies
General Counsel and Company Secretary, CDC Group plc
Chair, EMPEA Legal & Regulatory Council


In This Issue

Deal-By-Deal and Pledge Fund Models

Evergreen Alternatives to the 2/20 Term-Limited Fund

Reforms to OHADA Commercial Law: Towards a More Attractive Legal Framework for Private Equity

New Guidance for Fund Managers on Integrating ESG into the Investment Process

Pan-European Fundraising Passport for Venture Capital Firms: the EVCA Guide to the EuVECA

Legal and Regulatory Briefs