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Fund Operations

What's the most common way to handle defaulting LPs?

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Community Member
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Nov 29, 2023
Looking at the Cornerstone LPA for example, I find there's multiple avenues a GP could choose to deal with a defaulting LP. What's, based on industry experience, the rationale for choosing one over the other, and which ones are the most common?
- Removing the LP from the partnership by either considering their interest forfeited or selling it at a discount
- Using distributions to cover capital calls
- Pursuing legal action

And when does it make sense for the GP to waive the interest?

I imagine many of these decisions are down to the individual relationship with the LP, so I'd love to know the common/best practice here.
1 answer
Accepted Answer
Nov 29, 2023
Usually, the LP will work to find a buyer for the defaulted position. That is the most common way to manage this. 
Thanks!
Community Member
Nov 29, 2023 1:50pm
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