Worked structure one · Cross-Border Architecture

Exposure through an existing platform.

A fund that already exists wants an asset that sits under a different body of law. The exposure has been decided. What holds it has not, and that decision is bounded by six constraints created by four different kinds of document.

Five of the six are readable in the first week from papers the manager already holds. Three routes are drawn to the same depth. One survives, and this room sets out what it costs.

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01 · The transaction as it arrives

Worked structures

Structuring cross-border exposure to an illiquid asset through a platform that already exists.

The fund is formed, invested and borrowing. The manager wants exposure to an illiquid asset that sits under a different body of law from the one that constitutes the fund. The instinct is to hold the asset in the fund, and the instinct is where the difficulty starts.

It arrives as a question about an asset. Five readings say what has actually arrived.

What has already been decided

The exposure. Which asset, on what view, at what weight. None of that is structural and none of it is reopened here. A structure that argues with the investment decision has misunderstood which question it was asked.

What is already fixed

The platform. Its domicile, its tier, its constitution and its facility were settled before this asset existed, and none of the four is re-chosen for the convenience of an asset that arrives later.

What the file usually contains

A term sheet, a model with one line running from the asset to the fund, and a note on the asset's own country. What it rarely contains is the fund's own constitution and the facility, which between them create four of the six constraints.

What is genuinely open

The holding form. Which entity stands where, under which law, what instrument carries the exposure, where governance is written, and by what route cash reaches the register. All of it is a free choice on the day the file opens, and most of it is settled within a fortnight.

When the room is worth opening

Before any entity is formed and before a closing date has been given. After either, the same analysis produces the same answer at a price, because acting on it means unwinding something.

The asset is the only thing in this transaction nobody is arguing about. Everything that binds it was written down before it existed.

02 · The structural problem

Interfaces

The exposure is settled. The whole of the problem is what holds it.

Two things have to be true of the same structure on the same date, they are decided by two different bodies of law, and the order in which they are asked decides what the transaction costs to correct.

The exposure has been decided. What has not been decided is what holds it. The platform is a going concern with a register, a facility, an administrator and a constitution drafted before this asset existed, and none of those four was designed with a foreign illiquid holding in view.

Two things have to be true at once. The fund has to be permitted to hold whatever it ends up holding, and whatever it ends up holding has to be permitted to own the asset where the asset sits. Those are two different questions answered by two different bodies of law, and they are usually asked in the wrong order: the first is asked of counsel in week one and the second is discovered in week eight.

Why the platform is the harder half

An asset can be inspected. A platform has to be read. The constitution, the facility and the administrator's mandate are three documents in three registers of language, drafted at three different times by parties who never met.

Why the order comes out wrong

The first question is answered from a document the manager already owns. The second is answered by a country, by somebody admitted to practise there, on that person's timetable. The slower question is therefore asked later.

What the wrong order costs

Week eight is not a worse week than week one to receive an answer. It is a worse week to act on one. By then an entity has usually been formed and a date has been given to a lender and to a seller.

Neither question is hard. Each is answered by a party who cannot see the other, and both answers have to hold of one structure at one moment. Closing that distance is the work.

03 · What binds

Fund and asset financing

Four kinds of document create six constraints, and the rulebook creates one of them.

A constraint is understood by its source before its wording. Where it was written decides who can move it, how long that takes, and whether moving it is available at all.

Six bind, and they are created by four different kinds of document. Only one of the six is written in a rulebook.

The fund's own constitution creates three: the eligible-investment definition, the concentration limit, and the borrowing limit that any acquisition financing has to fit inside. The asset's own jurisdiction creates the fourth: who may hold the asset there, in what legal form, and with what local participation or licensing at the operating level. The existing facility creates the fifth: the permitted-investment covenant and the change-of-control provision, neither of which is a negotiation once the money is drawn. The administrator's mandate creates the sixth: whether it can account for and value the proposed chain on the fund's own reporting timetable, which is a question about a service agreement and is answered by a person rather than by a rule.

Five of the six are in documents the manager already holds. All five are readable in week one, by anybody, at no cost beyond the reading, and none of them is answered by drafting.

The six · what each costs to answer, and what it costs to answer late

The eligible-investment definition

An afternoon with the document. Answered late, it is answered against an instrument already described in a signed term sheet, and the instrument is what has to change.

The concentration limit

Arithmetic against a portfolio the manager already has on one page. Answered late, it is answered by a vote, which is a conversation with the whole register about one asset.

The borrowing limit

Read against the acquisition financing as proposed rather than as modelled. The two differ more often than they agree, and the difference is found by whoever documents the loan.

Who may own the asset where it sits

The only one of the six bought from outside, and the only one with a queue in front of it. Asked late, it does not delay a route. It ends one, after the route is built.

The facility covenant and change of control

Read from the facility in an hour. Consented to on a timetable no party here controls, which is why the request goes in the first week.

The administrator's mandate

The cheapest of the six to ask and the easiest to leave unasked. A chain it cannot account for on the fund's reporting timetable is a problem every quarter for the life of the holding.

Five of the six are answered by reading. The sixth is answered by a country, and it is the one that decides whether there is a transaction at all.

04 · The architectures considered

Holding chains

Three routes, drawn to the same depth, so that the second one exists on the day the first one fails.

A comparison is only a comparison if every route in it has been taken seriously. The route the manager arrived with is drawn to the same depth as the other two, and it is drawn first.

Three. Direct holding by the fund. A dedicated vehicle formed under the asset's own law and held by the fund. A holding chain, in which the fund's interest stands at the top, an intermediate entity holds beneath it, and a local entity owns the asset and carries whatever licence the operating activity requires.

They are not three versions of one answer. Each does something different to ownership, to control, to the route the cash takes home, to what the administrator has to do every quarter, and to what a buyer would be buying at exit. The three are drawn in full below, with what each one is asking to be true.

No route is closed on preference. Each is tested against the same six constraints in the same order, and closes only when a named constraint closes it. Two close for reasons visible before anything is formed: one because a country does not permit the holder proposed, one because the exit it produces is narrower than the term will tolerate.

The three routes, drawn with what each one asks to be true and what it costs somewhere else.

Three routes to one exposure, and what each does to the rest of the transaction

01 Origin · the exposure, already decided The manager has decided what it wants to own and why. That decision is the manager's, it was taken before the structural work begins, and the architecture starts from it.
02 Fixed · the platform A fund already formed, already invested and already borrowing. Its domicile, its tier, its constitution and its facility were settled before this asset existed, and none of the four is re-chosen for the convenience of an asset that arrives later.
03 Fixed · the asset's own law The asset's jurisdiction regulates ownership at the level of the owner rather than at the level of the transaction. Who may hold it, in what legal form, and with what local participation, is a condition of holding it at all rather than a term to be negotiated.

04 · the holding route · three answers, and one of them survives the six constraints

04a · route

Direct holding by the fund

04a.iThe eligible-investment definition has to admit the asset in the form the fund would hold it
04a.iiThe concentration limit binds against the whole of the position, with no layer to spread it across
04a.iiiThe asset's jurisdiction has to permit a foreign fund to own it directly, in that legal form

Two of the three are document facts, knowable in the first week from papers already in the building. The third is a question of local law, and it is usually the one that ends this route.

04b · route

A dedicated vehicle under the asset's own law

04b.iFormed where the asset sits, so the local ownership condition is answered at formation
04b.iiHeld by the fund directly, so the concentration limit is answered exactly where it was before
04b.iiiOne layer, so one set of accounts, one board and one place a buyer has to look

The cleanest of the three to run and the hardest to sell. The exit is a sale of an entity constituted where the asset is, into whatever buyer universe that jurisdiction contains, and that universe is decided at formation.

04c · route · survives

A holding chain, with the exposure split by form at the top

04c.iThe local entity owns the asset and carries the operating licence
04c.iiThe intermediate entity holds it, chosen for residence and for what the exit will sell
04c.iiiThe fund's interest is part equity and part instrument, so the concentration limit is answered by form
04c.ivOne more entity to run, one more board, one more set of accounts that has to be real

It survives because it answers three constraints at three different layers instead of asking one layer to answer all three. It costs a permanent entity that has to have substance, and the difference between this route and the other two is that the cost is stated at the outset rather than discovered at the exit.

The route that survives is rarely the elegant one. It is the one whose costs are visible before anybody has spent anything.

05 · The critical dependencies

The one-way doors

Four things have to be true, and not one of them is ours to make true.

Each dependency carries three things: the party who can answer it, the form the answer takes, and the point in the sequence by which it is needed. Missing any of the three, it is a line in a plan rather than a condition of the design.

Four, and every one of them has a name against it.

Local ownership · local counsel: That the asset's jurisdiction permits the proposed holder to own the asset in the form proposed. Owned by local counsel, confirmed in writing, before any entity is formed.
Residence and treaty · the manager's tax advisers: That the residence of the entity holding the asset supports the treatment the model assumes. Owned by the manager's tax advisers. Treaty access turns on the residence of the entity that holds the asset and on the terms of the particular treaty, including its anti-abuse provisions, so the answer belongs to the advisers who can give it and the chain is drawn to accept whichever answer comes back.
Facility consent · the manager and its lender: That the facility permits both the acquisition and the chain. Owned by the manager, requested under the facility's own terms, answered on the lender's timetable, and therefore the item that moves the closing date.
Administration · the administrator: That the administrator can account for the chain and value it. Owned by the administrator, and asked before the chain is drawn rather than after the entities exist.

What each one does to the design when the answer is not the assumed one

If the ownership answer is no

The route ends and the next is taken, which is why three were drawn. Nothing has been formed and nothing signed, because this condition sits ahead of both for exactly that reason.

If the residence answer differs

The chain accepts it. The intermediate layer was chosen for two reasons and the second, what the exit sells, does not move. Where the first weakens, the layer is re-sited or the economics restated, on paper.

If the lender consents with conditions

The conditions are structural more often than anyone expects: security over the intermediate layer, an information undertaking the administrator has to satisfy, a limit on borrowing beneath.

If the administrator cannot run it

The chain is redrawn or the service arrangement changed, while entities are still a drawing. An administrator asked after formation is accommodating a structure rather than commenting on a design.

Three of the four belong to parties outside the manager, answering on timetables this transaction does not set. That fact decides the sequence in the next part: everything owned by somebody else is started first.

06 · The architecture that survives

Illiquid assets

Three constraints answered at three layers, because no single layer can answer all three.

The structure that holds is not the one with the fewest entities. It is the one in which every entity answers a question the layer above it cannot, and in which the cost of each entity is stated before it exists.

The chain, with the concentration limit answered at the top of it rather than at the bottom.

The local entity owns the asset and holds the operating licence. The intermediate entity holds the local entity, and is chosen for two reasons that are stated separately because they are separate: the residence question, and the fact that the intended exit is a sale of that entity's shares rather than a sale of the asset. Where the concentration limit binds against a direct equity holding, part of the exposure is carried by an instrument the eligible-investment definition already admits and the rest by equity, so the limit is answered by the form of the holding rather than by an amendment nobody has the votes for.

Governance is written at the intermediate entity, because that is the only layer both the fund and the local entity can see. Cash flows are drawn once, from the operating level to the register, with every crossing named. A crossing is the point at which a payment made under one law becomes a receipt under another, and each one is a separate event with its own treatment. One asset does not produce one outcome, and the difference is made at the crossings.

Each layer, tested against what it does that the layer above cannot

The fund's interest, part equity and part instrument

Answers the concentration limit at the only layer where the form of the holding is still a free choice. It costs a treatment taken for the fund and for the holders. It breaks where the definition admits the instrument in the manager's reading and not in counsel's.

The intermediate entity

Carries the residence question and is the object the exit sells. It costs a board, accounts, a filing calendar and conduct in a place, maintained every year the position is claimed. It breaks where it holds nothing else and takes no decisions where it sits.

The local entity

Satisfies the ownership condition and holds the operating licence, neither of which can be held anywhere else on the chain. It costs local audit, local filings and local directors. It breaks where the licence does not move with the shares, which converts the exit into an asset sale.

The chain is not elegant and it was not drawn to be. It is the shape three constraints leave behind when each is answered where it actually attaches.

07 · The implementation framework

Execution-readiness

Seven items, each with a signature attached, and none of the signatures is ours.

A task list can be worked in any order. A dependency list cannot, and each item below names the party who closes it.

Seven items, in an order, each with a signature attached to it: local ownership confirmed; residence and treaty questions taken; facility consent requested; the administrator's capability confirmed; entities formed top down; documents drawn; financing documented against the constitution's borrowing limit rather than against the model.

The order carries more weight than any single item on it, and it is written as dependencies. Do not form the local entity until the ownership condition is confirmed in writing. Do not draw the instrument until the eligible-investment definition has been read against it word by word. Do not commit to a closing date until the lender's consent has a date of its own.

From there the work belongs to other people, and it is better done by them. The manager's counsel forms the entities and draws the documents. Its tax advisers take the residence and treaty questions and stand behind the answers. The administrator confirms what it can actually run. The lender answers under its facility. We hold the architecture while they work, and we re-test it whenever one of their answers comes back different from the answer the design assumed.

01 Local ownership confirmed Local counsel, in writing, requested on the first day. The only item with a queue in front of it, and the only one that ends a route rather than delaying it.
02 Residence and treaty questions taken The manager's tax advisers, in parallel with 01. The answer decides where the intermediate layer sits, so it is needed before formation.
03 Facility consent requested The manager, under the facility's own terms, in the first week. Answered on the lender's timetable, which is why this item sets the closing date.
04 The administrator's capability confirmed The administrator, while the chain is still a drawing. One that cannot value it changes it, and changing a drawing costs nothing.
05 Entities formed top down The manager's counsel. Blocked by 01 and 02. Formed in the order the chain is held, not the order that is quickest.
06 Documents drawn Counsel. The instrument follows the reading of the definition, not the other way round.
07 Financing documented Counsel with the lender, against the borrowing limit in the constitution rather than the model. The constitution is the document still in force when it is checked.

08 · What this case generalises to

Perspectives

The transaction is a type, and what transfers is the order the questions are asked in.

Nothing here depends on which asset, which country or which fund. Change all three and the same six constraints appear, created by the same four kinds of document, with the same two of them deciding the answer.

Five tests carry from this room to any exposure taken through a platform that already exists. Each is applied in the first week, from papers already in the building, and each is answered before anything is formed.

Read the platform before reading the asset

The constitution, the facility and the administrator's mandate, in full, against the transaction as proposed rather than as remembered. Five of the six constraints here came out of that reading.

Ask the country question first, because it queues

Every constraint outside the manager's own papers is answered by somebody else, on somebody else's calendar. Those items set dates. Everything the manager can answer alone is done while waiting.

Answer each constraint where it attaches

Structures fail when one layer is asked to satisfy three constraints attaching at three different points. A layer is a real annual cost, stated at the outset. An overloaded layer is also a cost, found at an audit or an exit by somebody with no interest in defending it.

Draw the exit at entry

What a buyer would be buying is decided when the holding form is chosen, years before anybody sells. Here the intermediate layer exists partly because the exit sells its shares.

Name every dependency against a party

Four dependencies, four owners, and none of the four is this firm. A dependency held by nobody is discovered at the moment it blocks something, which is later than the moment it could have been asked.

No manager, counterparty, adviser, asset, value, vintage or date appears in this room, and none of them would improve it. What transfers from one transaction to the next is the shape of the problem.

We hold the architecture, draw the routes to the same depth, and name every constraint against the document that creates it and every dependency against the party who can answer it. Formation, the opinions, the treatment and the consents belong to the manager's own advisers.

Worked structure one · written as a type · stated as at August 2026

Holding chains Where a structure sits The one-way doors

The manager decided what to own, and that decision was never in question here. Everything else on this page was decided by documents that were already in the building.

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