The investors' committee is the register's voice while the fund is closed.

A closed-ended fund's register cannot vote on every question, because the register is a hundred holders across a dozen time zones and the questions arrive weekly. The constitution creates a committee of the larger holders to speak for it on the matters the manager cannot decide alone: related-party dealings, extensions of the investment period and the term, changes of policy, the valuer's appointment, the key-person waiver, the continuation sale. The committee is the register's voice for the fund's life, and its worth depends on four things written at formation: who sits on it, how many must attend, what it may bind the register to, and what it may not. A committee written in a paragraph that names none of the four is a committee the manager convenes when it wants cover and ignores when it does not, and a register that relied on it has relied on a paragraph.

This note sets out why the committee exists and what it replaces, its composition and the seat as a negotiated term, its quorum and voting, the matters it decides and the matters it does not, the conflicted member, its relationship to the board and to the regulator, the information it receives, the minute as its evidence, the liability of its members, the lender's reading, the onshore vehicles' own committees, a comparison, a worked committee as a type, cases, what each party holds, the sequence, questions, terms and what to read.

Why the committee exists

A manager holds discretion over the fund's investments within the constitution's limits, and the register holds the constitution. Between the two are decisions the constitution reserves from the manager but cannot put to the register each time: a dealing with the manager's affiliate, which the manager cannot approve for itself; an extension, which changes the register's bargain; a change of policy, which changes what the register subscribed to. The committee takes those decisions for the register, and its authority is the constitution's delegation of the register's consent. It replaces a register vote for the matters the constitution names, and for no others.

Composition

The committee's members are the representatives of holders the constitution selects: the largest by commitment, a stated number of them; or holders above a threshold; or holders the manager invites with the register's approval. The anchor's seat is a negotiated term in its letter and a governance term the exclusion set usually protects. A committee of three is a committee a manager can manage; a committee of nine is a committee that cannot meet. The constitution fixes the number, the selection, the term of a seat, and the replacement of a member whose holder transfers its units, and it says whether a member's seat is the holder's or the individual's.

The seat as a negotiated term

The anchor's seat is in its letter, and later large holders ask for seats in theirs. A seat is a governance term and not an economic one, and most exclusion sets keep it tied to size so that the most-favoured-nation clause does not populate the committee with every holder that elected. The seat's value to the holder is the voice and the information, and its cost to the fund is the committee's size. A manager that grants seats to close commitments has a committee whose size was set by the raise, and a constitution that caps the number and fixes the selection has a committee whose size was set by design. The letter's seat is drafted to the constitution's cap, and a holder that wants a seat the cap does not allow is offered an observer's place without a vote.

The observer

An observer attends and receives papers and does not vote or count toward quorum. Observers are given to holders whose size justifies information and not a voice, to the lender where the facility asks for it, and to the regulator's nominee where the regime requires one. A committee with more observers than members is a presentation, and the constitution caps observers too. The observer's confidentiality obligation is the same as a member's, and the constitution says so.

The first meeting

The committee's first meeting, within a period from the final close, adopts its procedures: the chair's selection and term, the notice period beyond the constitution's minimum, the form of papers, the use of written resolutions, the recording of the minute and its approval, the treatment of information members receive. The procedures are the committee's own and within the constitution, and they are where a committee becomes a body rather than a list of names. A manager that drafts the procedures for the committee's adoption has drafted them for the manager, and a committee that adopts its own has a chair that read them.

Quorum and voting

The constitution fixes the quorum as a number or a proportion of members, and the vote as a majority of those present, of all members, or of members by commitment. A quorum of two on a committee of five is a quorum the manager can assemble from its friendliest members; a quorum of a majority is a committee. Voting by commitment gives the anchor the committee; voting by head gives each member the same voice. The constitution says which, and it says whether the manager's representative attends, speaks and is counted, which it should not be for the matters the committee exists to decide.

What it decides

The constitution lists the matters: related-party dealings above a threshold; extensions of the investment period and of the term; amendments to the investment policy within the manager's power; the valuer's appointment and its rotation; waivers of the key-person clause; approval of the continuation sale's terms; the allocation policy's adoption and change; the manager's removal for cause, where the constitution gives the committee a role in it. Each matter is named because the committee's authority is the list, and a matter not on it is the manager's or the register's.

The manager's removal and the committee's part

A manager's removal for cause is the register's decision by the constitution's majority, and the committee's part is to find the cause, to read the evidence, and to recommend. The constitution says whether the committee may suspend the manager's investment discretion pending the register's vote, whether it may appoint an interim manager, and whether it may instruct the administrator to withhold the charge. A constitution that gives the committee none of those powers has a removal process that takes a quarter while the manager continues; one that gives it the first has a process that can act. The committee's power here is the sharpest it holds and the one a manager negotiates hardest, and the register reads it for whether the voice has a hand.

The continuation sale's approval

The continuation sale is the manager's conflict in its largest form: the manager sells the fund's positions to a vehicle the manager will also manage, and the price is the manager's to propose. The committee's approval is the conflict's process, and its papers are the fairness opinion, the valuation, the continuation vehicle's terms, the manager's roll of its carry and the election offered to each holder. A committee that approves on the manager's presentation has approved the manager's price; one that instructs the fairness opinion's provider, reads the valuation against the last annual mark, and reads the election for whether a holder may stay, sell or roll, has spoken for the register. The constitution reserves the sale to the committee and the election to each holder, and the minute records both.

What it does not decide

The committee does not decide investments, because that is the manager's discretion and a committee that decides investments is a manager without a licence. It does not amend the constitution, because that is the register's. It does not remove the manager without cause, because that is the register's by the constitution's majority. It does not bind a holder on a matter the holder's own consent is needed for, such as an increase in its commitment or a change to its class's economics. The line between what it decides and what it does not is the line between the register's voice and the register, and the constitution draws it.

The conflicted member

A member whose holder has an interest in the matter before the committee, such as the anchor on a co-investment allocation in which the anchor has priority, or a holder that is the counterparty to a related-party dealing, is conflicted, and the constitution says what follows: disclosure, abstention, or exclusion from the quorum. A committee whose conflicted members vote is a committee that approves the anchor's own allocation by the anchor's vote. The usual term is disclosure and abstention, with the quorum computed on the unconflicted, and the minute records it.

The member's confidentiality and the holder's position

A member receives information about the fund's positions, its related parties and its disputes that the register does not, and the constitution binds the member and its holder to confidentiality. The holder's own regime may require it to report what it learns, as a pension institution reports to its trustees or a sovereign to its board, and the constitution's confidentiality term is drafted with the holder's obligations in view. A member that learns of a position the holder's other funds could trade on has a conflict the holder's own compliance handles, and the constitution says the fund's information may be used only for the holder's decisions about this fund.

The committee between the regimes

A fund in one register jurisdiction with holders in several has a committee whose members sit in several regimes, and the regime of the fund governs the committee. A member that is a regulated person in its own jurisdiction reads the committee's decisions for what its own regulator would say about a regulated person approving related-party dealings of a vehicle it holds, and the constitution's statement that members act for their holders and not for the fund is what the member's own compliance relies on. The committee's documents say which law governs them and where a dispute about a decision is heard, and it is the fund's.

The board and the regulator

A fund that is a company has a board, and the board holds the company's decisions under the companies law of the jurisdiction; a fund that is a partnership has a general partner with the same role. The committee does not replace the board. The board approves what the companies law requires the board to approve, and the committee approves what the constitution requires the committee to approve, and for a related-party dealing both may be needed. The regulator reads the committee's approvals as the constitution's process for conflicts, and a regime that requires conflicts to be managed by a process reads the committee's minutes as the process's evidence.

The information it receives

The committee receives what the constitution says it receives and what the manager chooses to give it: the papers for each matter, the related party's identity and the terms, the valuation beneath a continuation sale, the administrator's computations it is asked to read. A committee that receives the papers a week before it meets reads them; one that receives them at the meeting does not. The constitution fixes the notice and the papers, and the committee's own procedures fix the rest.

The written resolution

Most of the committee's decisions need no meeting: the valuer's reappointment, the approval of a minute, a consent within a policy already read. The constitution permits written resolutions, signed by the number of members the vote requires, circulated with the papers and returned within a period. A written resolution is the committee's decision with the same record, and the procedures say which matters may be taken by it and which need a meeting. Related-party dealings and the continuation sale need a meeting, because the questions need asking; the rest may go by writing.

The minute

The committee's minute is its evidence: who attended, who was conflicted and abstained, what was presented, what was decided and on what grounds. A committee without minutes has no record of having spoken, and a regulator that asks for the process's evidence receives the manager's recollection. The minute is drafted by the manager or by the administrator, approved by the committee, and kept with the fund's records for the period the regime requires.

Liability

Committee members act for their holders and not for the fund, and the constitution says so: they owe no duty to the fund or to the other holders, they are indemnified by the fund for acting in good faith, and their holders are not liable for their decisions. A member that is not protected is a member that does not attend, and a committee whose members do not attend has no quorum. The indemnity is the price of the committee, and the register pays it.

The lender's reading

A capital-call lender reads the committee's powers for what could change its base: an extension of the investment period, which extends the drawdowns; a key-person waiver, which keeps the fund investing; the manager's removal, which may trigger the facility's default. The lender's facility names the committee decisions that need its consent, and the manager that convenes the committee on one of them convenes the lender too.

The onshore vehicles' own committees

Onshore holding companies and joint ventures have boards and may have shareholders' committees under their own documents, and the fund's committee does not reach them. A related-party dealing at the onshore joint venture, such as a construction contract with the developer's affiliate, is approved at the joint venture under its agreement, and the fund's committee reads it only if the constitution reserves onshore related-party dealings to it, which it should where the developer is the manager's affiliate. The two layers of governance are drafted to meet at the platform's committee, which reads what the joint ventures' boards approved.

By feature · by drafting	Written at formation	Left to a paragraph	What the register holds
Composition	Number, selection, seat term, replacement	"A committee of certain investors"	A committee or the manager's guests
Quorum	A majority, computed on the unconflicted	"Such members as attend"	A committee or two friends
Voting	By head or by commitment, named	Unstated	A committee or the anchor
Matters	The list	"Such matters as the manager refers"	The register's voice or the manager's cover
Conflicted member	Disclosure, abstention, exclusion from quorum	Unstated	A process or the anchor's self-approval
Information	Notice and papers, stated	Unstated	Reading or a presentation
Minute	Required, kept	Unstated	Evidence or recollection
Liability	No duty, indemnity	Unstated	Attendance or absence

A committee, as a type

A fund's constitution forms a committee of five: the four largest holders by commitment at the final close and one holder the manager invites with the register's approval, each seat the holder's with a named representative, replaced on transfer. Quorum is three, computed on the unconflicted; the vote is by head; the manager's representative attends and speaks and is not counted. The matters are listed. A conflicted member discloses and abstains. Papers go out a week before each meeting. The administrator minutes, the committee approves the minute, and it is kept. Members owe no duty and are indemnified. In year two the committee approves a related-party construction contract at an onshore joint venture, reserved to it because the developer is the manager's affiliate, with the anchor abstaining because it co-invests beside the joint venture. In year four it approves an extension of the investment period with the lender's consent obtained first. In year nine it reads the continuation sale's fairness opinion and approves the terms. Each decision has a minute, and the regulator's inspection in year five read the minutes.

The structure paper's page

The structure paper carries a page on the committee: composition and cap, selection and seat terms, quorum and vote, the list of matters and the list of exclusions, the conflicted member's treatment, observers, notice and papers, the minute, the indemnity, the interaction with the board and the lender, and the onshore matters reserved to it. The page is written before the anchor's letter so that the seat is granted to a design, and it is the page the committee's chair reads at the first meeting.

The affiliated developer's platform

A development platform whose developer is the manager's affiliate has a committee whose largest work is related-party approval, because every joint venture, every construction contract and every promote is a dealing with the affiliate. The constitution reserves all of them to the committee, above no threshold, and the committee's papers for each carry the affiliate's terms beside a third party's. A platform that reserved only dealings above a threshold, with the threshold set at the platform's level, has a committee that reads none of the joint ventures' contracts, and the affiliate is paid under documents the register's voice never saw.

The second fund's reading

A manager's second fund is raised from holders who sat on the first fund's committee or read its minutes. A first fund whose committee met on notice with papers, whose conflicted members abstained, whose minutes were kept and whose decisions were the committee's is a fund whose committee members commit to the second; one whose committee was convened for cover is a fund whose members ask for a different constitution. The second fund's committee provisions are the first fund's record, and the anchor that sat on the first writes the second.

Four cases, as types

A constitution forms a committee in a paragraph. The manager convenes it for a related-party dealing with two of the five members present and the anchor, the counterparty, voting. The register learns of the dealing in the annual report and the regulator asks for the process.

A committee of nine by commitment threshold cannot assemble a quorum. The manager's extension request waits two quarters, the investment period ends by date, and the position the manager was about to buy is bought by another fund.

A committee whose members owe a duty to the fund, under a constitution that did not exclude it, is sued by a holder over a continuation sale the committee approved. The members resign, the committee has no quorum, and the fund's remaining decisions go to the register by vote.

A committee written at formation with composition, quorum, matters, conflict, information, minute and indemnity decides every reserved matter for ten years on a record the regulator read once and accepted.

What each party holds

The register holds the committee's composition, quorum, matters and conflict rules, as its voice.

The manager holds the convening, the papers and the list of matters it must bring.

The members hold their seats, their abstentions and their indemnity.

The administrator holds the minute.

Counsel holds the constitution's committee provisions and their interaction with the board's and the regulator's.

The lender holds its consent rights over the committee's decisions that touch the base.

Where it surfaces

It surfaces at the anchor's letter, when the seat is asked for and the constitution's cap is read. It surfaces at the first related-party dealing, when the manager convenes the committee and discovers whether the quorum can be assembled. It surfaces at the anchor's first conflict, when the anchor's representative asks whether it may vote. It surfaces at the lender's first consent, when the committee's extension decision is read for the base. It surfaces at the regulator's inspection, when the minutes are requested. It surfaces at the continuation sale, when the committee's approval is the conflict's process and the fairness opinion is its paper. And it surfaces at a holder's claim, when the members ask whether they are protected.

The cost of getting it wrong

A committee without a quorum rule costs the fund its decisions, which wait or are taken by a manager that should not have taken them. A committee whose conflicted members vote costs the register the process the regime expects, and the regulator prices the absence. A committee without an indemnity costs the fund its members, who resign when the first claim arrives. A committee without minutes costs the fund its evidence, which is the manager's recollection at inspection. Each cost was a clause, and the clause is the fourth item in a constitution whose first three are the economics.

The committee and the register vote

Matters the constitution reserves to the register, by a majority of commitments, are taken by written resolution or at a meeting, and the committee's role is to recommend. A committee recommendation carries the register on most matters, because the committee read the papers and the register did not, and a constitution that requires the committee's recommendation before a register vote on a reserved matter has given the register a reading it can rely on. The committee is the register's voice on its own list and the register's reader on the register's.

A timeline, as a type

At the first close the constitution fixes the committee; the anchor's letter carries its seat within the cap. At the final close the four largest holders are selected and the fifth is invited and approved. At the first meeting the committee adopts its procedures and its chair. In year one it reads the allocation policy and approves the valuer's appointment. In year two it approves a related-party construction contract at an onshore joint venture with the anchor abstaining. In year four it approves an extension of the investment period after the lender's consent. In year five the regulator reads its minutes. In year seven it waives a key-person event on the manager's replacement plan. In year nine it reads the continuation sale's fairness opinion and approves the terms, and it recommends the register's vote on the amendment the sale needs. In year eleven it approves the term's extension, and in year twelve the fund is wound up on a record the committee kept.

The sequence

1. The committee's composition, selection, seat terms and replacement are fixed in the constitution.
2. The quorum, the vote and the manager's non-voting attendance are fixed.
3. The matters are listed, and the matters excluded are listed too.
4. The conflicted member's disclosure, abstention and exclusion from quorum are fixed.
5. Notice, papers, the minute and the indemnity are fixed.
6. The committee's procedures, adopted at its first meeting, carry the rest.

Questions a manager asks

Should the anchor chair it. The chair is the committee's choice at its first meeting; a constitution that gives the anchor the chair has given it the agenda.

Can a member's representative be the holder's adviser. If the constitution allows and the holder appoints; a representative that is an adviser to several holders is a conflict the committee reads.

What if a member's holder transfers. The seat goes with the units if the constitution says so, or lapses and is refilled by the selection rule.

Does the committee meet in person. By any means the constitution allows, and written resolutions for matters that need no discussion.

What does the committee cost. Its members' indemnity, the administrator's minuting and the papers; the fund bears it.

Can the manager remove a member. No; a member's seat is the holder's under the constitution, and the manager that could remove members would have a committee of its own choosing.

Terms used

Investors' committee: the body of holders' representatives that decides the matters the constitution reserves to it.

Reserved matters: the list of decisions the constitution gives the committee.

Conflicted member: a member whose holder has an interest in the matter, who discloses and abstains.

Quorum on the unconflicted: a quorum computed excluding abstaining members.

Minute: the committee's record of attendance, conflict, presentation and decision.

Indemnity: the fund's protection of members acting in good faith.

What to read

The constitution's committee provisions; the anchor's letter on its seat; the committee's procedures; its minutes; the facility's consent rights; the onshore joint ventures' own governance. On this site, the governance room under Where complexity arises, the platform room under Land and the continuation room under Structures.