The above is a summary of the most common cover letter requests. The question of whether such requests should be granted should be considered on a case-by-case basis. From the above discussion, it can be drawn a remarkable conclusion that the legal enforceability of a parallel agreement depends on the content of the language of the ancillary agreement and that it is therefore necessary to draft such ancillary agreements with the utmost care. Courts interpret the nature of the relationship between the parties through the document itself and, therefore, it is imperative to ensure that the terms of the ancillary agreement are as clear, complete and consistent as possible. If the parties want to make the ancillary agreement binding from the outset, they can insert a clause to that extent and clearly include it in the ancillary agreement to avoid future disputes. On the other hand, if the parties do not want the secondary letter to be binding, they can do so by inserting a clause in the agreement. It is therefore necessary to take into account the language and structure of the agreement when drawing up an ancillary agreement. Collateral letters remain valuable tools for keeping contractual provisions secret or circumventing them. If they do not deserve their dark reputation, they certainly deserve special attention. Third, by amending the terms of the main contract, the subsidiary letter may change the classification of the entire agreement. In France, for example, certain management leases are concluded by the parties in order to conceal in the letter of guarantee the actual qualification of a contract, i.e. the purchase of the company. Here are some practical considerations that might be relevant when managing a sub-letter fund: Credit facilities are an increasingly popular tool used by closed-end funds to meet short-term transition needs and facilitate the capital call process.

However, they raise some different issues regarding collateral that can be problematic, particularly if the lender`s ability to take collateral is compromised or the credit base is otherwise limited. For example, when exclusion or transfer rights affect the existing credit check based on credit. To increase secrecy, parties to a cover letter sometimes choose to keep it in trust. In this subsequent situation, the parties must carefully develop the instructions they wish to give to the trustee and may decide to appoint lawyers as trustees in order to take advantage of the legal privilege associated with this profession. AIFMs subject to the Alternative Investment Fund Managers Directive (2011/61/EU; The “AIFMD”) (whether as an alternative investment fund manager (“AIFM”) established in the European Economic Area (“EEA”) that manages an EEA alternative investment fund (“AIF”) or markets an AIF to investors established in the EEA) must comply with the rules of the AIFMD on preferential treatment. The AIFMD requires investors to receive a “description of how the AIFM ensures fair treatment of investors and, where an investor receives preferential treatment or a right to preferential treatment, a description of that preferential treatment, the type of investors receiving such preferential treatment and, where applicable, their legal or economic relationship with the AIF or AIFM”. This disclosure obligation applies before the investment and after significant changes in such preferential treatment. The introductory recitals of the AIFMD also require that any preferential treatment be disclosed in the rules or articles of association of the AIF – this can be achieved through broad disclosure in the private placement memorandum or partnership agreement (although some AIFMs prefer to include tailor-made terms to ensure that investors do not get too much out of a “shopping list”). The possibility of requesting additional information from the AIFM is also often included in the private placement memorandum, with summaries of sub-letter rights usually provided.

Overall, when negotiating sub-letters, it is of the utmost importance that all parties are aware of the content of the parties involved and that they always respect the rules and regulations. Secondly, in most European countries, secondary letters do not affect the rights of third parties, who can nevertheless enforce a parallel agreement known to them if it favours them. An example of this rule can be found in a case where the French Supreme Court ruled that legitimate heirs can request the reduction of a hidden gift contained in a cover letter signed by their author. When a fund manages an advisory committee, committee members are usually confirmed in a cover letter with the respective investor. Certain information rights relating to advisory committee meetings may also be set out in the letter. The parties to an ancillary agreement should seek advice on the transaction in question, taking into account their circumstances. It is not uncommon to negotiate the implementation of cash withdrawals in a cover letter. The exact conditions depend on the documentation of the fund. As a general rule, a parallel agreement will require the fund to dispose of illiquid assets if the investor so wishes (especially with regard to the dissolution of the fund). From the perspective of the Securities and Exchange Commission (“SEC”), there is concern that an investor will receive preferential treatment in a cover letter, which could have a negative impact on other investors, such as .B preferential liquidity and disclosure rights.

However, such provisions may be acceptable if sufficiently communicated to other investors who are able to take this information into account in their investment decision. The more acute the conflict or the greater the potential impact on other investors, the more detailed and complete the disclosure should be. Sec audit staff are known to review collateral letters to verify that they are being complied with and that appropriate disclosure has been made. Deficiencies in this area can lead to negative written conclusions at the end of an audit and, in sufficiently serious cases, to a reference to enforcement. If you need a cover letter for business reasons, contact me – or maybe we can help you with other legal advice or business contracts? Secondary letters are usually limited to the largest investors in a fund. In exchange for a large investment or an early investment, an investor may seek to agree on advantageous terms through a cover letter, which can range from reduced fees to higher investment capacity. The terms of a cover letter can vary greatly depending on the agreement between the fund and the investor. In May 2006, the SEC`s Investment Management Division provided an overview of the SEC`s position on letters of guarantee. [1] When it comes to last-minute changes, it is often easier to set out the relevant details in a cover letter than to make changes to the contract and have them initialled. .