Illiquid assets · room 02 of 13
Exit design.
An exit is built, not found. What a structure can still do at year five was settled by what was written into it at entry, and the routes nobody specified are the ones that close first.
Where complexity arises · Illiquid assets · thirteen rooms
01 · The decision rule
Exit before entry
Choose the way out, then build the way in.
The vehicle matters more on the day you leave than the day you arrive. Every architecture is judged by one test: how does the capital come home, on what date, under whose definition of done.
Structures chosen for entry convenience are re-chosen later at a price, and it is rarely a re-drafting cost: a consent that cannot be obtained, a lock that runs from the wrong date, or a route closed years earlier for a reason unrelated to the exit. Two documents hold that price down, and the years between them are what keeps the first of the two true.
- The entry memorandum
Entity chain, instrument, governance and exit mechanism, mapped against the conditions that will govern the way out, with the lock calendar attached. It records the routes rejected and why, precisely so a disagreement lands on reasons rather than positions.
- The exit-conditions memorandum
The conditions evidenced item by item at the end, definition first. It is the document the entry memorandum promised, and it is the only proof that the exit specified at the drawing is the exit that arrived.
- The years between them
One document promises and the other delivers, and everything in between is the work of keeping the promise true: the consent inventory current, the filings clean, the phase map cut for the exit rather than for delivery, and the evidence assembled while it is still cheap to assemble.
A structure that keeps three routes live at year five costs more at entry. A structure tuned to one route priced the other two out before the first tranche moved, and nobody wrote that down.
02 · Three routes
The routes, priced at entry
One structure holds three exits open. Tuning it to one closes the other two.
A buyer, a public market and another sponsor each want a different thing transferred, on a different calendar, evidenced to a different standard. Only one of the three publishes its standard in advance.
| What must be true at entry · by route | Trade sale of the asset or the holding entity | Listing, or a sale into a listed vehicle | Sponsor-to-sponsor sale of the holding structure |
|---|---|---|---|
| What actually transfers | The buyer chooses the asset or the shares. Both have to be transferable, and the consents and the tax consequences of each differ. | The asset, or the entity, has to meet an admission standard set by somebody else and published in advance. | The shares in the holding structure, in one instrument. That is the point of having a holding structure at all. |
| What the state exit test requires | Where release is gated on a test a state body defines, the definition is not contractual. It is a fact to be evidenced item by item. | The same gate, and the admission standard on top of it. An asset built and evidenced to institutional and regulatory grade keeps every route open. | Where a lock runs on repatriation rather than on transfer, a sale between non-residents that repatriates nothing does not engage it. Whether the lane is open turns on where both parties sit and whose law reaches them. |
| What the holding chain must permit | Change-of-control consents in every material contract, identified at entry rather than found at signing. | Every intermediate layer needs a reason to exist that survives an admission review conducted by somebody who did not build it. | The chain has to transfer as one thing, which means it has to have been built as one thing. |
| The documentary standard | The buyer standard. Set by the buyer, and discovered late. | The admission standard: published, knowable at entry, and the only one of the three a structure can be built to before a counterparty exists. | The successor sponsor standard, which is the investor's own diligence standard applied a second time to the same file. |
| Timing | The buyer calendar. | A window, and the window is not the manager's to choose. | The fund's own end date, which is why this is the route used when the other two do not open. |
| Pricing | Negotiated against a print, where a print exists. | Priced against a public comparable. | Priced by a process the manager itself runs, which is why the conflicts process is the whole of the route. |
| What closes it | A consent that cannot be obtained, or a defect in the chain the seller inherited and never read. | A record built to a private standard and presented to a public one. | Constitutional documents that do not permit it, a valuation nobody independent produced, a conflicts process improvised in the room. |
| What keeps it open | Transferability of both the asset and the shares, tested at entry and re-tested at every amendment. | Institutional and regulatory grade from the first month, built for its own sake and not for the listing. | One clean holding instrument, a valuation process specified before it is needed, and a conflicts process written into the constitutional documents. |
03 · The sequence
The one-way doors
Three of these six steps cannot be taken twice.
The order is not administration. A step becomes one-way the moment it puts a fact on somebody else's record, and no later step re-dates it.
- 01 Exit specification The routes to keep live are named, and each is priced against what it demands of the chain. Nothing has happened yet.
- 02 Instrument and funding channel A bank testing a remittance of sale proceeds examines how the acquisition was funded. The channel the first tranche came through is a fact no later tranche re-dates. One-way
- 03 The phase map cut A well-cut map turns one long lock into a sequence of shorter ones, and a badly cut one does the reverse. Once delivery is committed against it, re-cutting is not an edit. One-way
- 04 Consent inventory Every change-of-control consent, transfer restriction, pre-emption right and registration the chain depends on, with an owner and a date against each line.
- 05 First tranche funded Where a hold runs per tranche rather than from first close, this tranche starts its own clock on the day it lands. A staged programme is a staircase of dated locks. One-way
- 06 Exit conditions evidenced The conditions proved item by item, under the definition that owns them. This is the step the whole sequence was built to reach.
The marked steps cannot be taken twice. After one of them the change that would have been an edit becomes a consent exercise, a re-evidencing or a wait, which is why the questions they turn on are asked at 01 and not at 05.
04 · Continuation
The related-party sale
A continuation is a sale to a vehicle the same manager runs.
The question arrives as whether a continuation is available, and availability is the smallest part of it. Every clause of that one sentence creates a constraint, and the five below stand whatever the rulebook turns out to say.
- 01 A sale To a related party, so the price is not set by an arm's length process unless one is deliberately constructed. A certificate signed by the party being verified is not a certificate. A valuation produced by the party standing on both sides of the trade is not a valuation either.
- 02 To a new vehicle So the tier question and the domicile question are answered again from the top, by people who answered them once already and may not remember why. The tier is chosen when the fund is formed, not when it is shown, and the new vehicle is being formed now.
- 03 Whose units are offered So the promotion perimeter applies again, from the beginning, in every arrival state the offer reaches. A centre registration of a vehicle says nothing about what may be promoted in the country around it, and the answer is per country and per offer rather than per manager.
- 04 To investors who already hold the asset Which is a fresh investment decision and not the continuation of an old one. It is therefore a classification event and a disclosure event, and the entity that subscribes into the new vehicle has to clear its tier in its own right, whatever it cleared at the first close.
- 05 By a manager with its own conflicts duty An Authorised Firm carries its own obligation to identify and address conflicts, and in substance to disclose material inducements connected with how a client came to be introduced. That obligation runs under the firm's own conduct rules, and consent from an investor committee does not discharge it.
Not one of the five turns on whether the centre permits the transaction. That is read out of the fund rules before it is asserted, and it is not asserted here.
05 · Liquidity
Redemption on an illiquid book
A redemption right against a five-year asset is a design, not a term.
Half the investor base wants a redemption right and the assets take five years to exit. No drafting cures that: four questions decide it, and the fourth is the one this page leaves open.
Control, not strategy. Participants do not have day-to-day control over the management of the property, whether or not they hold a right to be consulted. Genuine direction of the asset by the participant is what that limb is read against, and whether an arrangement is a fund or ownership with an agent is a characterisation question settled on the facts, by counsel. That hinge decides whether a side-car, a managed account or a co-investment is a fund at all, and it cuts both ways.
The population of the vehicle. Those beside you determine in practice how it behaves under pressure: on redemptions, on valuations, on the patience the arrangement requires. That population is a design feature, knowable in advance, and it was fixed when the fund was formed rather than when the redemption was asked for.
A construction. An illiquid asset has no observable print, so every redemption price is built rather than read, and the same construction sets the manager's own economics. One hand builds the number that prices an investor out and the number that prices the team in, which is a governance question long before it is a valuation question.
Whether a closed-ended vehicle in either centre may carry a limited redemption, and on what conditions, is a question for the fund rules of that centre. It is open on this page, deliberately, because a structure that assumes the answer has assumed the most expensive thing on it.
06 · The last mile
Forum, security and execution
Enforcement is a drafting subject long before it is a litigation subject.
Five instructions decide whether a contested exit can actually be closed. Every one of them is settled at the drawing, years before the dispute that tests it.
- Security, escrow and reach
A great deal can be done before the dispute rather than after: security over assets in a place where execution is straightforward, sums held under escrow arrangements, obligations placed on an entity with something to lose in a reachable jurisdiction. Each of the three is a term somebody has to ask for at the drawing, and none of the three arrives on its own.
- Where the property actually is
Execution happens where the property is, not where the reasoning was written. Ask, before signature, which entity holds what, and in which country its bank, its register and its title documents live. That answer, not the governing-law clause, decides how hard the last mile will be.
- Every forum provision on one page
Subscription documents carry one, the management agreement another, a side letter a third, and any arbitration wording sits across all of them. They do not always agree. Putting them on one page takes an afternoon, and the day the exit is contested is the day that disagreement gets priced.
- Seat, governing law and portability
Two separate choices, made in the same paragraph and constantly confused. The governing law decides what the contract means. The seat fixes the procedural law of the arbitration and the court that supervises it. An award's portability is answered by the law of the place where execution is sought, not by the seat. A judgment is enforceable where the law of the place of execution says it is, and nowhere by default.
- The opt-in, read as a drafting choice
Jurisdiction can be handed to a court by consent, and therefore handed away by inattention: under the Judicial Authority Law as amended by Dubai Law No. 16 of 2011, parties may agree in writing to submit a dispute to the DIFC Courts even where the matter has no other connection with the Centre. For a structure whose assets sit outside both centres that is a live choice at entry, and it carries a downstream execution question rather than a solved problem.
07 · Binding constraints
Constraints on the drawing
The exit test belongs to whoever defines it. Rarely to the parties.
Eight constraints decide what an exit design can be built to carry. Where a real limit exists and its text has not been read here, the constraint is stated and the number is not.
- 01 The definition of done is not contractual Where release or repatriation is gated on a test a state body defines, the definition is not contractual and the parties do not own it. It is a fact to be evidenced item by item, and the evidence is assembled from the first month rather than in the year the exit is wanted.
- 02 The lock runs per tranche Where a hold is counted per tranche of investment rather than from first close, a staged programme is a staircase of differently dated locks. Most first entries model it from the wrong date, and the model is where the error stays hidden.
- 03 The phase map decides the lock Where each phase is treated as a separate project, a well-cut phase map turns one long lock into a sequence of shorter ones, and a badly cut one does the reverse. The map is cut for delivery logic and then lived with for exit logic.
- 04 Income and disposal do not share mechanics Hold for yield and buy to sell are different strategies with different exits, and a structure should know which one it is from day one. Intention is read as evidenced, not as stated, and the evidence is the chain, the contracts and the accounts rather than the memorandum.
- 05 The price may not be free Where a state fixes the terms on which a non-resident may buy or sell against a certified fair value, the negotiated price is not the price. The certificate is part of the file, and the discount a buyer thought it had negotiated becomes a filing problem rather than a bargain.
- 06 A structure with missed filings has a discount attached Every instrument issued, transferred or pushed downstream has a reporting form and a deadline. They are diarised at entry, because a buyer's diligence reads the file rather than the intention, and a gap in the file is priced by the person who finds it.
- 07 A continuation is three events at once A related-party sale, a new offer and a fresh investment decision, and each of the three carries its own duty to its own audience. None of the three is discharged by satisfying the other two, and the conflicts obligation is not discharged by the committee that consents to it.
- 08 Domicile settles the remedies Domicile settles which law constitutes the vehicle, which court construes its documents, and where the remedies sit if a term is tested. It was chosen at formation, for reasons that had nothing to do with the exit, and it is one of the choices that cannot be revisited without starting again.
08 · Where it breaks
Failure, and its moment
None is a drafting failure. Each is decided at entry and found at exit.
Nine of them, and each is a decision already taken rather than a risk being run. The date each one surfaces is chosen by somebody else.
The exit route was assumed rather than specified, so nothing in the structure was ever tested against it. It surfaces the first time somebody asks for the exit conditions in writing, which is usually the buyer and not the manager.
The domicile, the vehicle form and the instrument were chosen for the calendar to first close. It surfaces at year five, at a price, because a structure chosen for entry convenience is re-chosen later and the second choice is made under time pressure.
The map was drawn for construction logic and never read for exit logic. It surfaces at the first partial exit, as one long lock where several short ones were available and nobody costed the difference.
The change-of-control consents were inventoried when the sale was agreed rather than when the chain was built. It surfaces in the buyer's diligence, with no time left to obtain them and no leverage left to ask.
The file was kept to the standard the manager and its lenders accepted between themselves. It surfaces at the admission review, which is the first moment a published standard is applied to a record built without it.
The transaction was put to investors before the valuation process, the conflicts process and the constitutional reading existed. It surfaces at the investor committee, which is the worst room in which to design any of the three.
The channel was chosen for convenience on the first tranche and nobody read it again. It surfaces at the remittance, years later, when the proceeds are tested against how the acquisition was funded and quietly find a different door.
Four documents carried four provisions and no one ever put them on one page. It surfaces at the dispute, which is the only moment anybody reads all of them, and by then the disagreement between them is a term of the settlement.
The forum was chosen and the location of the bank, the register and the title documents was not. It surfaces at execution, which is the point at which a judgment or an award stops being a document and has to reach property.
09 · Where the work stops
Three documents, two boundaries
We have no pride invested in a route, only in the exit it must survive.
Three documents come out of this work and two things sit outside it, named here rather than assumed. The choice of route is the manager's and its authorised advisers'. What we return is each route drawn, with the constraint that would remove it.
Written into the entry memorandum at the first gate: the entity chain, the instrument, the governance and the exit mechanism, with the lock calendar attached and every route rejected recorded against the constraint that removed it.
Built in year one and held current. Every change-of-control consent, transfer restriction, pre-emption right and registration the chain depends on, with an owner and an expected date against each line, so the inventory is a working instrument rather than a schedule assembled for a buyer.
The conditions evidenced item by item at the end, definition first. The document the entry memorandum promised, and the record that a third party can test without us.
Whether the constitutional documents permit what is proposed is a reading of the fund's own instruments and it belongs to fund counsel. So do the consent analysis, the tax treatment of each route, any admission eligibility opinion and any conflicts opinion on a related-party disposal. Your counsel signs the law. We hold the commercial logic their advice is set against.
Produced by a party independent of both sides of the trade. A certificate signed by the party being verified is not a certificate, and the same sentence decides who may build the number a continuation is priced at.
We are an independent specialist transaction-architecture firm. Where an investor reaches or leaves an asset through a holding company or a fund interest, the arrangements for that acquisition or disposal are made by the authorised advisers on the manager's side of the table, each under its own permissions.
One document promises the exit and another delivers it. The years between them are the mandate.
Stated as at August 2026 · read again on any day it matters