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Entity Management for Private Equity

In recent years, Private Equity Firms have picked up momentum by pocketing tremendous money while stalking ever-larger acquisition targets. Their reputation for dramatically increasing the value of their acquisitions has helped fuel this development. However, their ability to achieve high returns is typically attributed to several factors:

  • High-powered incentives for private equity portfolio managers

  • High-powered incentives for the operating managers of businesses in the portfolio

  • The aggressive use of debt provides financing and tax advantages

  • A determined focus on cash flow and margin improvement

  • Freedom from restrictive public company regulations

The portfolio enterprises are related to the fund sponsor. These are all related entities, meaning the fund sponsor actively manages each entity's filings and compliance obligations.

In contrast, limited partners are unrelated. Therefore, the fund sponsor is not responsible for the compliance obligations of limited partner individuals or businesses.

As investments happen and legal entities proliferate, the risks and resource consumption increases. To simplify entity management for Legal and help them streamline inter-company agreements, organization documents, and agreements, an Entity Management Software enables the team to organize documents for:

  • The general partner limited liability company

  • The limited partnership fund

  • The investment management LLC

The software helps with document repository could include the investment management agreement between the fund manager and the limited partnership and the deal documents or at least those needed for more than record retention. The documents related to the fund LP could include the investment agreements and any subsequent capital call documentation for a limited partner. From the perspective of each portfolio company, the LP will inherit the formation records as part of the investment.

Traact helps smoothen entity management for private equity funds by offering an array of solutions. Bringing compliance obligations under one SaaS-based platform like Traact reduces the cost of compliance and legal risk associated with non-compliance.

Concerning governance, Private equity firms allocate people to multiple governance roles across their legal entities. For example, the same people may sit on various boards or serve as officers.

Entity management software simplifies the assignment and tracking of the involved people in various roles. Combining that role tracking with governance terms of service allows the private equity firm to examine who was in charge during any period in the past.

Private equity ownership structures are intricate. Therefore, creating a clear visualization of the ownership structure is time-consuming and prone to errors. Organization charts are necessary for different purposes, such as internal legal restructuring, financing diligence requirements, or regulatory filings.

Entity management software should generate an organization chart automatically, handle any ownership structure regardless of complexity, support charts from the perspective of any subsidiary, not just an ultimate parent, and Illustrate the ownership hierarchy.

The ownership information is ever-changing. Hence. The organization chart should be able to automatically update the latest information. At Traact, our ultimate goal is to help Legal simplify their operations, save time and resources, and manage entities accurately. You can learn more about our platform by booking a free demo.

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