Co-investor rights are negotiated and codified in the limited partnership agreement. The strongest LP agreements protect minority investors without paralyzing decision-making.
Information rights
Quarterly financial statements, annual audited financials, K-1s by mid-March, and prompt notice of material events.
Major-decision approval
Approval of asset sales, recapitalizations, additional equity issuances, and changes to the management incentive plan.
Tag-along and drag-along
If the sponsor sells its stake, co-investors usually have the right to participate pro-rata (tag-along). Sponsors typically have the right to force minority investors into a sale (drag-along) on the same terms.
Preemptive rights
Right to participate in future equity raises to avoid dilution.
Sponsor removal
Some deals include for-cause sponsor removal rights, requiring a supermajority of co-investors. Uncommon but worth asking about.
If you are evaluating a transaction in this space and want a candid second look, Solender Capital is happy to compare notes. Reach out through our contact page and share what you are working on.