CFA Level I · CFA Level I Exam · Investments in Private Capital: Equity and Debt
A limited partnership agreement includes a no-fault divorce clause. This provision most likely allows:
A no-fault divorce clause lets a specified supermajority of limited partners end the fund or remove the general partner without having to prove wrongdoing. It is a governance protection for investors, separate from default penalties for missed capital calls or term extension rights.
- Athe general partner to remove limited partners who miss capital calls
- Ba specified supermajority of limited partners to terminate the fund or remove the general partner without proving causeCorrect
- Cthe general partner to extend the fund term indefinitely without investor approval
Explanation
A no-fault divorce lets a supermajority of LPs dissolve the fund or remove the GP without showing misconduct. Defaulting LP penalties and term extensions are different provisions.
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