Structures · room 07 of 11
Continuation vehicles.
A continuation vehicle is a sale and a fundraise inside one transaction, and the manager stands on both sides of it. Everything difficult about the structure descends from that single fact.
01 · The transaction
Continuation vehicles
A continuation is a sale and a fundraise, and the manager signs both.
The existing fund raises a new fund to buy one or more of its own assets. Its investors then choose between cash at the transaction price and a rolled interest in the new vehicle.
Five parts, and the last of them is the reason the first four are hard.
- The sale
The existing fund transfers the asset to a new vehicle at a price. What governs it is the existing fund's own constitution: the conflicts article, the related-party transfer provisions, and whatever consent those provisions specify. Not a rulebook, not a regulator, and not a market standard. One clause in one document, drafted by people who had no view about this transaction.
- The fundraise
The continuation vehicle is a fund and is formed as one. Everything on the ladder attaches to it at formation, in the centre where it is constituted, and how it is marketed answers to the promotion perimeter of every place it is offered. A transaction planned as an amendment to an existing arrangement meets this half of the structure late.
- The election
Every investor on the existing register chooses between two terminal states: cash, distributed by the existing fund out of the purchase price, or a rolled interest in the continuation vehicle at the transaction price. Two states, one window, and a roll rate the manager does not control. The proportion that elects cash decides how much new money the transaction needs, which is why the price and the election are one design and not two.
- The tender offer
The same election, run one level up. The interests in the existing fund change hands rather than the assets, so the constitution's transfer provisions and the register do the work its conflicts article does in a continuation. The pricing question, the consent question and the disclosure question are the same questions in a different document.
- The manager, on both sides
The manager manages the seller and it will manage the buyer. No process removes that fact. A process is what makes it survivable, which is a different claim and a narrower one, and it is the claim the advisory committee, the incoming investors and anyone testing the transaction afterwards will hold the manager to.
The structure is governed by two bodies of rule at once, and they answer to different people. Managers who treat it as one or the other are caught by the half they ignored.
02 · When it is reached for
Reasons and refusals
An asset that needs more time is a reason. A manager that wants its economics reset is not.
Three conditions reach for this structure. Four situations make it the wrong answer, and all four are visible before a buyer is approached.
The asset will not sell inside the fund's remaining life, and a sale forced by the calendar rather than by the asset destroys value the manager can already see. The continuation vehicle buys the runway the constitution does not.
The asset needs funding the existing fund no longer has the capacity to provide, because the investment period has closed or the reserves are committed elsewhere. New money and new terms arrive together or not at all.
The manager and a subset of the investors both want to stay in it. A sale to a third party converts a position that two of the parties to it would have kept, and the election is the mechanism that lets them keep it.
Each of the four is a document fact or a timetable fact. None of them improves with drafting, and none of them is answered by running the process harder.
The constitution does not permit a sale to an affiliate at all, or permits it only on a consent the manager cannot realistically obtain. That is a document fact and it is knowable in week one.
The value is genuinely contested and no independent price can be produced. The election then asks investors to choose between two numbers the manager made.
The purpose is to reset the manager's economics rather than to extend the asset's runway. Every experienced secondary buyer prices that, and every advisory committee sees it.
The timetable will not accommodate institutional investors' own consent cycles. The election is then answered by defaults rather than by decisions.
03 · The election
The topology
Every investor gets a choice. What the choice is worth was settled before it was offered.
Two gates stand before the election and either one can stop the transaction. Past them, every investor on the register chooses between cash and a roll.
Neither terminal state is the right answer. Both are, for different holders on one register, and the design decides which is rational for each.
Two gates, one election, two terminal states
- 01 Origin · the existing fund Holding the asset, and approaching either the end of its term or the end of its capacity to fund the asset further. Both are dates written in the constitution, so both are known years before they arrive.
- 02 Gate one · the conflicts consent The constitution's own machinery: advisory committee consent, a majority in interest, or both. A gate rather than a step. Nothing downstream of it exists if it does not open, and what it requires is written in a document the manager already holds.
- 03 Gate two · price formation An independent valuation, a market process, and a party running that process who is not the manager. A price a process produced can be shown to the people who will test it. A price an opinion produced is the manager's own mark with a covering letter.
04 · the election · one window, and the whole register has to answer it
04a · terminal state
Cash, at the transaction price
- 04a.iThe investor's share of the purchase price is distributed by the existing fund
- 04a.iiThe exposure ends at the number the process produced, and at no other number
Everything a cash elector receives rests on the price and on the process that produced it. That is why gate two stands before the election and not beside it.
04b · terminal state
Roll, into the continuation vehicle
- 04b.iThe interest is exchanged at the transaction price, into a new constitution and a new register
- 04b.iiOn new terms, on the same terms, or on a stated status quo alternative
- 04b.iiiAlongside new money from incoming investors, on the terms that brought them in
A rolling investor exchanges a constitution it has lived under for one it has not read yet. Which of the three answers the terms question takes decides whether that is a continuation or a fresh subscription.
The manager's carried interest in the existing fund crystallises on the sale. Whether it is taken, reinvested or rolled is one of the two or three terms every incoming investor tests.
04 · The order of steps
The sequence
Six steps stand in one order. Four of them cannot be taken twice.
The same transaction drawn as a sequence, with the irreversible steps marked. Only the first two are reversible, and the second of them already puts the transaction in front of a buyer.
- 01 The constitution read One clause and the consent it specifies, read against the register that would have to deliver it. Nothing has been said to anyone, and every option downstream is still open.
- 02 The process opened Independent valuer instructed, process party appointed, first approach to a buyer made. The promotion perimeter engages at that approach, which is ahead of any consent under the constitution.
- 03 The first communication to investors A transaction described to the register cannot be un-described. Every later change is read against what was said first, and the register keeps the first version. One-way
- 04 The price fixed Once the number stands, the terms on which investors roll cannot move without re-cutting it. Terms settle before price, or price settles twice. One-way
- 05 The election window opens The window is a term of the transaction from the day it opens. An investor whose own governance cycle will not fit inside it answers by default rather than by decision. One-way
- 06 The change of control notice Served under every asset-level facility the transaction touches. Consent then runs on the lender's timetable, lands last, and is the item that moves the closing date. One-way
Four of these six cannot be taken twice. After a marked step the change that would have been an edit becomes a re-cut price, a supplement, or a disclosure to everyone already told, which is why the questions they turn on belong at 01 and not at 05.
The order is not a preference and it is not a plan. It is a property of the documents, and it is drawable before the first approach to a buyer.
05 · The binding constraints
What binds, and when
The constraint that ends this transaction is in a document written years before it.
Eight constraints bind a continuation, and they do not arrive together. Each has something that creates it and a week in which it usually surfaces.
| The constraint | What creates it | Where it surfaces |
|---|---|---|
| A sale to an affiliate has to be permitted | The existing constitution's conflicts article and its related-party transfer provisions, and the consent they specify. No regulator writes that clause. The fund's own document does. | Week one if anybody reads it. Week eight if nobody does, and the costs are sunk by then. |
| The price has to be supported by a process | No regulator writes this one, and neither does the constitution. It is the standard the advisory committee applies, the standard the incoming investors price against, and the standard anybody testing the transaction afterwards reaches for. | At the advisory committee. Again at the closing of the new vehicle, and again in any challenge brought after the transaction is done. |
| The election has to be a genuine choice | The conflicts obligation the manager owes its own regulator, sitting on top of whatever the constitution itself requires. Time and disclosure have to be proportionate to the decision being asked for. | When an institutional investor's committee cannot meet inside the window. |
| The rolling investors' terms are a design decision | Three answers, and no fourth: the same terms, new terms, or a stated status quo alternative. Each changes what an incoming investor earns, so each changes the price. | During price formation. It has to be settled before the price is fixed, never after. |
| The new vehicle is a fund and is formed as one | Tier, domicile, offer document, holder cap and the manager's own permission, all attaching at formation on the ladder of the centre where the vehicle is constituted. | At formation, if it was planned as a formation. At authorisation, if it was planned as an amendment. |
| Marketing the new vehicle is an offer | Every place the vehicle is offered has its own promotion perimeter. A perimeter about communications, running on its own trigger and answering to no clause in the constitution. | At the first outbound communication, which is usually before the conflicts consent. |
| Change of control under asset-level debt | The facility agreement's own provisions, on the lender's own timetable, in a transaction whose timetable was set by other things entirely. | Last, and not by anybody's choice. The request cannot sensibly be made until the transaction is agreed, and the lender's own committee then sets the pace. |
| Classification and provenance run again | Every incoming investor is classified and evidenced from the beginning. Managers in both centres operate under strict regimes aligned to Financial Action Task Force standards, and where the capital came from and how the wealth was built are separate questions, evidenced separately. | At onboarding of the incoming investors, in parallel with everything above it. |
06 · Where it breaks
Failure points
None of these five is a surprise on the day. Each was decided weeks earlier.
Five failure points, in the order they arrive. The first is the highest-value question on this page, and answering it costs an afternoon.
- 01 The conflicts article is read in week eight The consent threshold turns out to be unreachable, or it requires a class of consent the register cannot deliver. The transaction dies with the professional costs already spent, and nothing about the asset was ever the problem.
- 02 The valuation is the manager's own mark and nothing else Cash electors have a grievance with a number attached to it. The advisory committee withholds consent, and the process runs again from the beginning at cost.
- 03 The election window is shorter than the investors' governance cycles The roll rate collapses. The cash requirement rises above what the incoming money will fund, and the price has to be re-cut with the election already open.
- 04 Change of control consent is not obtained The debt at the asset becomes repayable at closing. The equity the transaction needs rises by the amount of it, and the price no longer clears.
- 05 Marketing began before the consent The manager has been offering an asset it may not be permitted to sell, on a perimeter that is independent of the conflicts question and does not care how that question is eventually answered.
Each of the five has a week in which it is cheap and a week in which it is fatal. Which of the two it is asked in is the manager's decision, and it is usually taken by default.
07 · ADGM and the DIFC
The two centres
The new vehicle is a new fund. Nothing about a continuation lightens the ladder it stands on.
Seven facts decide how the continuation vehicle is built and where its documents are construed. None of them is displaced because the buyer and the seller share a manager.
The ladder is drawn at vehicles and legal form, and each centre writes its own. What matters here is the moment: a continuation vehicle makes the trade that descending the ladder involves once, under time pressure created by a transaction that is already running, rather than at the leisure of a first formation.
A roll of the existing register has to fit inside the holder cap of the rung the new vehicle stands on, and at the narrowest rung inside the minimum subscription the rules fix as well. That is an arithmetic question about your own investor list, answered against the ladder before it is answered against anything else.
In ADGM, Schedule 1 to the Financial Services and Markets Regulations 2015 specifies the regulated activities, and managing a collective investment fund sits among them in its own right, separate from managing assets under a discretionary authority. Two permissions, two sets of duties. Running the existing fund is not, of itself, permission to run the new one, and which of the two a house holds is a question to put in the same week the vehicle is drawn.
A continuation puts two vehicles with two constitutions on opposite sides of one contract, so the domicile question is asked twice and the two answers are not required to agree. What each answer settles is drawn at vehicles and legal form.
The DIFC restricts financial promotions in or from the Centre, at Article 41A, and Article 41A is drawn on where the communication is made rather than on where the person communicating is physically located, which is our reading of its terms as at August 2026. Anything touching the United Kingdom answers section 21 of the Financial Services and Markets Act 2000 on its own terms, whatever has been cleared elsewhere. The two perimeters are separated at co-investment, and a continuation crosses both.
An authorised firm carries its own obligation to identify and address conflicts, and that duty is the manager's whatever status any other party holds. An advisory committee's consent is a consent under the constitution. It is not a discharge of the duty the manager owes its regulator, and the two are examined by different people against different standards.
Forum provisions rarely live in one place. 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. A continuation transaction has three bundles rather than one: the existing fund's, the new vehicle's, and the transaction documents that join them.
Where the reading stops · August 2026
One question stays open in both centres. Whether either publishes anything about a transfer of assets between two vehicles the same firm manages, beyond the conflicts obligation the firm already owes, is read from that centre's own text, and nothing published on this site answers it.
Every one of the seven was decided by somebody, at some point, in a document. In a continuation they are decided twice, and the second time under a timetable set by the first.
08 · Where our part ends
The line
The sequence can be drawn before the first approach. Everything on it is signed by somebody else.
The gates, the election and the one-way doors are drawable in week one, from documents the manager already holds. Seven pieces of work then sit with your own regulated, legal and tax advisers, and the last row below is what the room hands them.
What consent the constitution requires for a sale to an affiliate, and whether the register can deliver it. Read from the document and stated by the counsel who will stand behind the reading.
Appointed and instructed so that the price is supported by a process rather than by an opinion. Who runs the process matters as much as what it returns, and both are visible to everyone afterwards.
The offer of the two terminal states, the disclosure that accompanies them, and the window. Drafted by counsel, because an election is a contract with every holder on the register at once.
Covering the marketing of the new vehicle in every place it will be marketed, not only in the place it is constituted. One opinion per place, and the places are decided by where the buyers are rather than by where the manager is.
Run for every electing investor, in the jurisdiction that taxes that investor. A roll that is neutral for one holder is a disposal for the next, and the election is offered to both of them in the same document.
Change of control under each asset-level facility, sought on the facility's own terms and answered on the lender's own timetable.
The new vehicle formed, its tier chosen, its offer document drawn to the content its tier requires, and its manager permissioned for what it will actually do.
What this room ends on: the two gates and the election drawn as one pathway, the six steps with the four that cannot be taken twice marked, each constraint set against the document that creates it, and the questions the instruments leave open stated rather than answered.
We draw the pathway, mark the doors that close behind you, and ask in week one the question that is usually asked in week eight. The consent, the price and the signature stay exactly where they are.
Read at the Collective Investment Law and Rules, Schedule 1 to the Financial Services and Markets Regulations 2015 and Article 41A · August 2026