Side letters, and the elections they bring.
Record what each side letter grants once. ShareSign works out which investors may elect it under their MFN right, sends each a form of what it may elect, and writes what it ticks into the register as it signs.
Side letters and MFN elections come with Business, in Funds.
The short answer
A side letter
A side letter is an agreement between a fund and one of its investors that adds to or changes the fund's terms for that investor alone: a lower fee, more reporting, a seat on the advisory committee, a right to co-invest, or a provision its tax or regulatory position needs. A fund with many investors ends up with many of them, each worded its own way.
An MFN right, and the election
A most favoured nation clause lets an investor take terms granted to other investors, usually those whose commitment is no larger than its own, except provisions tied to another investor's own circumstances. After the fund closes, each investor with the right is told what it may elect, and answers in writing. Keeping that straight across dozens of letters is where it goes wrong.
How the elections run on ShareSign
01
Each side letter, signed and filed
Upload it or make it from a template on the investor's page, send it as any document, and the signed copy files itself in the investor's own folder.
02
What it grants, recorded once
A short title and the provision's words as an election form should print them, with every investor it was granted to. One tied to an investor's own position is marked as not electable, with why.
03
Who may elect what, worked out
For every investor with an MFN right: each provision granted to an investor whose commitment is no larger than its own, never one it already has, and never one marked not electable.
04
A form each, to sign
Choose who to send to and how many days they have. Each investor's signatory gets its own form: every provision it may elect, in full, with a tick box beside it.
05
Written into the register as it signs
What it ticked is recorded beside each provision the moment it signs, and the form files itself in its folder.
The Funds guide
The rules it keeps
- Nothing ticked
- A form signed with nothing ticked is an answer, and is recorded as one.
- No answer
- A form that expires is recorded as no election.
- A provision recorded later
- Offered in the next forms you send.
- Only its own
- Each investor sees the fund's documents and its own folder, and nothing of anybody else's.
