What to Know About Co-GP Relationships Legally

Co-General Partner (Co-GP) relationships are becoming increasingly common in private equity, venture capital, and real estate funds. These collaborative arrangements enable multiple general partners (GPs) to pool expertise, capital, and operational capabilities to manage a single fund or deal. While Co-GP structures can enhance efficiency and access to deal flow, they also present unique legal complexities that must be addressed to protect all parties involved and ensure regulatory compliance.

This article outlines the key legal considerations and best practices for structuring and managing Co-GP relationships.

What Is a Co-GP Structure?

A Co-GP arrangement involves two or more firms or individuals sharing the general partner role in managing a fund or investment vehicle. Responsibilities may include sourcing deals, raising capital, executing transactions, managing portfolio assets, and handling investor relations.

Common scenarios include:

• Partnerships between emerging and established managers

• Real estate developers co-sponsoring a property syndication

• Cross-border collaborations between domestic and international GPs

Key Legal Issues in Co-GP Relationships

1. Governance and Decision-Making

Define governance rights and decision-making authority:

• Who has final authority over major fund decisions?

• What is the voting threshold for investment approvals?

• Are there tie-breaking mechanisms or designated managing partners?

Document these provisions clearly in the partnership agreement or joint venture operating agreement.

2. Economic Sharing and Compensation

Establish how profits, carried interest (carry), and management fees will be allocated:

• Pro-rata based on capital or effort contribution?

• Carve-outs for origination, asset management, or fundraising?

• Clawback provisions in case of underperformance?

Economic terms must align with SEC guidance on compensation fairness and fiduciary obligations.

3. Regulatory Compliance and Registration

Each GP may have separate registration or exemption obligations:

• Are all parties properly registered as investment advisers or exempt reporting advisers (ERAs)?

• Does the arrangement trigger broker-dealer or placement agent scrutiny?

• Are both parties compliant with the Investment Advisers Act of 1940 and state blue sky laws?

Work with counsel to ensure regulatory obligations are clearly assigned and disclosed.

4. Liability and Indemnification

Address liability exposure:

• Are GPs jointly and severally liable for fund obligations?

• Are there indemnification clauses protecting each Co-GP from the other's misconduct?

• Is insurance (e.g., D&O or E&O) sufficient and extended to all parties?

Proper drafting helps prevent finger-pointing and litigation in case of disputes or regulatory action.

5. Control of Intellectual Property and Branding

Clarify ownership and use of:

• Investor decks, deal documents, and diligence materials

• Fund names, trademarks, and logos

• CRM systems and proprietary databases

Include IP assignment and non-compete provisions where appropriate.

6. Exit Rights and Dispute Resolution

Provide for dissolution, buyouts, or exit rights in case the partnership ends:

• What happens if one Co-GP exits the relationship or breaches the agreement?

• Can the remaining party continue to use the fund structure, branding, or LP relationships?

• Is arbitration required before litigation?

Exit mechanics should be clearly defined in advance.

Best Practices for Structuring Co-GP Relationships

• Use a Formal Co-GP Agreement: Avoid informal or email-based understandings. Use comprehensive legal documents.

• Define Roles and Responsibilities: Set expectations for capital raising, deal sourcing, underwriting, and reporting.

• Perform Due Diligence: Vet the financial, regulatory, and reputational background of Co-GPs.

• Disclose to LPs: Investors must be informed of Co-GP structures, especially if compensation or control differs from the main GP.

• Consult Regulatory Counsel: Evaluate implications under SEC, FINRA, and state-level rules.

Co-GP structures offer compelling opportunities for fund sponsors to leverage complementary strengths, but they require careful legal planning. From governance and compensation to compliance and dispute resolution, every aspect of the relationship must be clearly documented and proactively managed.

If your firm is entering a Co-GP arrangement or needs assistance drafting a Co-GP agreement, contact our firm at 786.461.1617 for a consultation. Our attorneys provide experienced legal counsel to help you structure Co-GP partnerships that support long-term success and regulatory compliance.