Washington Clauses Relating to Capital Calls refer to specific provisions included in legal agreements or contracts, particularly in investment contracts, related to the requirements and procedures for capital contributions. These clauses ensure that investors fulfill their financial obligations in funding investment projects or ventures. In the state of Washington, several types of clauses relating to capital calls are commonly used. These clauses aim to protect the interests of investors and maintain the financial stability of the investment project. Some key types of Washington Clauses Relating to Capital Calls are: 1. Capital Call Provision: This clause outlines the procedures, obligations, and timing for investors to contribute capital to the investment project. It states the maximum amount an investor can be called to contribute, the notice period required for a capital call, and the acceptable modes of payment. 2. Capital Account Maintenance: This clause specifies the method for maintaining and adjusting capital accounts or capital balances for each investor. It may include details of how capital contributions and distributions are recorded, how profits and losses are allocated among investors, and any adjustments based on subsequent capital calls or distributions. 3. Default and Remedies: This clause addresses the consequences and remedies if an investor fails to fulfill their capital contribution obligations. It may outline penalties, interest charges, or potential legal actions that can be taken by other investors or the investment project entity. Here, conflicts may be resolved through arbitration or under the jurisdiction of Washington courts. 4. Transferability of Capital Contributions: In some cases, investors may have the option to transfer their capital contributions to other investors. This clause outlines the conditions and procedures for transferring capital interests, including the required approvals or consents from other investors or the investment project entity. 5. Amendment and Termination: This clause explains the process for amending or terminating the capital call provisions in the contract. It may require written consent from the investors or a specific majority vote to modify or remove any capital call requirements. Overall, Washington Clauses Relating to Capital Calls play a crucial role in investment agreements to ensure adequate funding and financial stability for investment projects. These clauses offer clarity, define obligations, and provide remedies if any party fails to meet their capital contribution responsibilities.
Washington Clauses Relating to Capital Calls
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For LPs: Hold on to some of their capital. Not having to contribute all their capital upfront gives LPs flexibility to invest the capital elsewhere until it's called. ? Use distributions to cover future investments/expenses. Some funds pay distributions to LPs before calling all of their committed capital.
A capital call line of credit is a facility provided by a financial institution (i.e., Silicon Valley Bank) in exchange for interest. General partners (GPs) draw funds from these facilities on a regular (often quarterly) cadence instead of calling capital directly from limited partners (LPs).
Private equity firms typically issue capital calls when an investment deal has been reached and is nearing close. Investors have a predetermined amount of time, which is usually between a week and 10 days, to provide the funds. Once investors provide the funds they are repaid later on with capital contributions.
In most limited partner agreements, not all, there is a clause that says if a limited partner continues to not fund their capital commitments, they will forfeit all of their prior capital commitments. This means by missing one capital call they are actually walking away from a large amount of money.
"Capital call" facilities (also known as "subscription line" facilities) are facilities made available to funds (often on a revolving credit basis and for general working capital purposes) which are secured against the uncalled capital commitments of the investors in the fund including: (i) the right to make capital ...
A capital call, also known as a "draw down," is the act of collecting funds from limited partners whenever the need arises. When an investor buys into a private equity fund, the firm makes an agreement with the investor that these funds will be available when the firm requests them.