Compliance Checklist for VC and PE Firms

The following is a “compliance checklist” that is designed to help a typical venture capital or private equity firm consider its level of compliance against various governmental and contractual requirements that commonly apply. The compliance checklist is a representative list of the requirements that commonly apply to a “Firm” that manages one or more venture capital or private equity funds (each a “Fund”). It is not an exhaustive list of all requirements that could possibly apply to a Firm, the Funds such Firm manages, or the related “General Partner” entities of such Funds. The compliance checklist should be reviewed regularly to recheck the issues covered as a means of measuring compliance with the governmental and contractual issues discussed below.

Securities Related Filings

1. More than 5% or 10% of Public Securities

Do any of the Funds managed by your Firm together with the Funds' General Partner entities and your Firm's managing principals beneficially own on a combined basis more than 5% of the securities of a public company?

YES NO

2. Officers and Directors of Public Companies or Beneficial Owners of more than 10% of Public Securities

Does any member or partner of the General Partner of any Fund managed by your Firm serve as an officer or director of a public company or does any such Fund, General Partner or person beneficially own more than 10% of the securities of a public company (including, in the aggregate, shares of such public company beneficially owned by all Funds, and General Partners managed by your Firm, and managers or general partners of such General Partners)? Note that “beneficial ownership” of a security means the power to control the voting or disposition of such security.

YES NO

3. Large Manager Filing

Does your Firm exercise investment discretion over more than $100 million in publicly traded securities?

YES NO

4. Large-Trader Filing

Does your Firm trade exchange-listed securities?

YES NO

5. Commodity Pool Operator and Commodity Trading Adviser Rules

Has any Fund managed by your Firm invested in a put, call, cap, floor, collar, or similar option for the purchase or sale, or based on the value, of interest rates, currencies, commodities, securities, debt, indices, or other financial or economic interest or property of any kind?

– OR –

Has any Fund managed by your Firm invested in other funds or investment vehicles that invest in such instruments or contracts?

YES NO

6. New Issues

Do any of your Funds plan to invest in “new issues” of securities by a company in its IPO?

YES NO

7. Municipal Adviser Registration

Do any of your Funds have a Limited Partner that is a state, county or municipal investor who has funded their investment with proceeds raised by the sale of municipal securities?

YES NO

Investment Adviser Act Compliance for “Exempt Reporting Advisers”

8. Confirming SEC Exemption – Domestic Adviser

If your Firm’s principal place of business is in the United States:

Are all of your clients “private funds?”

– AND –

Does your Firm manage only Funds that qualify as “venture capital funds,” or are your assets under management less than $150 million (on a gross basis, including uncalled capital)?

YES NO

9. Confirming SEC Exemption – Offshore Adviser

If your Firm’s principal place of business is not in the United States:

Does your Firm manage less than $150 million from any place of business in the US and are all of your US clients “private funds?”

YES NO

10. “Exempt Reporting Adviser” – Form ADV

Has your Firm filed an “Exempt Reporting Adviser” report on Form ADV?

YES NO

11. Amending ERA Report

Has your Firm moved, changed its name, or changed other key identifying information (including the main contact person)?

– OR –

Has the legal form of your Firm been restructured?

– OR –

Are any employees or other key personnel of your Firm subject to any governmental investigation (criminal or regulatory) or civil lawsuit?

– OR –

Have there been any changes to the ownership or key managers or officers of your Firm?

YES NO

12. Insider Trading Policy

Does your Firm have an insider trading policy?

YES NO

13. “Pay to Play” Rules

Does any Fund managed by your Firm have investors that are state or local governmental entities, or does the marketing plan of the Fund’s General Partner include efforts to solicit such investors?

YES NO

14. California Lobbyist Registration

During the calendar year, has your Firm or has anyone at your Firm contacted or visited any California state pension plans (e.g., CalPERS, CalSTRS, or UC Regents) about making an investment in any of the Funds managed by your Firm?

YES NO

Tax Matters

15. Cashless Contribution or Management Fee Waiver

Do any of your Fund Agreements permit your Firm or any of your General Partners to reduce management fee otherwise payable by a Fund in order to either (a) satisfy the capital contribution obligations of the General Partner to the Fund ("cashless contributions") or (b) receive an incremental share of the Fund's profits ("management fee waiver")?

YES NO

16. “Qualified Electing Fund” Elections

Does any Fund managed by your Firm own non-US portfolio companies that may be treated as passive foreign investment companies? Or is your Fund subject to side letter agreements that call for making “Qualified Electing Fund” elections?

YES NO

17. “Electing Investment Partnership” Elections

Do your Funds anticipate having transfers of interests where the tax basis of the Fund's assets at the time of transfer exceeds the fair market value of such assets by more than $250,000 (i.e., a transfer that may require mandatory basis adjustments)?

YES NO

18. The Foreign Account Tax Compliance Act (“FATCA”) and Common Reporting Standard (“CRS”)

Are any of your Funds organized outside of the US?

YES NO

19. State Franchise Taxes and Annual Reports

Are any of your Funds and their respective General Partners (and any other legal entities in your Firm’s complex) required to pay annual franchise or other taxes or fees (and any related filings)?

YES NO

20. FBAR – Reporting of Foreign Bank Accounts

Does the General Partner of any Fund advised by your Firm have signature, investment, or similar authority over any of the following accounts:

A foreign bank or brokerage account with a value of $10,000 or more; or
A foreign bank or brokerage account of an investment vehicle formed by the Fund (such as an offshore “alternative investment vehicle”) with a value of $10,000 or more.

YES NO

21. Statement of Specified Foreign Financial Assets

Does any General Partner of any Fund managed by your Firm hold (1) any financial account maintained by a foreign financial institution such as an interest in a foreign investment fund or (2) other foreign financial assets held for investment that are not in an account maintained by a US or foreign financial institution, with an aggregate value exceeding $50,000 ($100,000 in the case of taxpayers filing joint returns)?

YES NO

22. Electronic Delivery of Schedule K-1s

Does your Fund plan to provide its investors with annual Schedule K-1s in electronic format?

YES NO

23. Partnership Audit Rule Provisions

Do your Fund Agreements contain updated partnership audit provisions to allow your Funds to comply with the entity-level partnership audit rules enacted as part of the Bipartisan Budget Act of 2015 (the "BBA")?

YES NO

Contractual Obligations

24. LPA & Side Letter Undertakings

Does your Fund Agreement, or any side letters, call for on-going certifications, such as annual compliance statements, valuation methods, personal investments by managers, ERISA, or other matters?

YES NO

25. ERISA – Venture Capital Operating Company Requirement

Do “benefit plan investors” (e.g., private pension plans, etc.) own more than 25% of any class of limited partnership interests in any Fund managed by your Firm?

– OR –

Is your Fund required to maintain its status as a “venture capital operating company” under its Fund Agreement or any side letters?

YES NO

International Matters & Other Matters

26. Anti-Money Laundering Compliance

Have any Fund investors or portfolio companies engaged in activities that may be considered suspicious? Suspicious activities would include instructing a Fund managed by your Firm to wire funds to or accept funds from a bank not located in a “Financial Action Task Force” jurisdiction. (View a list of FATF jurisdictions.)

– OR –

Does any Fund managed by your Firm have any investors or portfolio companies located in a geographic region or nation targeted by a Sanctions Program of the US? (View a list of sanctions programs.)

– OR –

Are any investors in any Fund managed by your Firm on the list of suspect individuals and entities maintained by the US Office of Foreign Assets Control (“OFAC”)? (View the specially designated nationals list.)

YES NO

27. Marketing or Other Operations in the European Union

Did your Firm market (i.e., actively solicit investors) a Fund in the EU, Iceland, Liechtenstein and Norway (the “EEA”) or Switzerland after July 22, 2013?

– OR –

Does your Firm plan to market (i.e., actively solicit investors) a Fund in the EEA or Switzerland?

YES NO

28. Privacy Policy

Has each Fund managed by your Firm included its annual Privacy Policy Notice with its annual report or other document delivered to the Fund’s investors?

YES NO

Next steps

If any of the potential filing obligations or other matters discussed above are applicable, or if you have questions about such matters, please contact your Cooley attorney. The matters discussed above are intended as a general description of the law; this document is not intended to provide specific legal advice or to create an attorney-client relationship with Cooley LLP. Before taking any action on this information, you should seek professional counsel.

Capture your results

In your desktop browser, choose file › print to print a copy of this document for reference.

In iOS, you can send yourself a PDF of the document: (1) tap the share arrow in the browser; (2) tap print; (3) pinch to zoom into the page preview area, the page will zoom to full screen; (4) tap the share arrow in this window, then tap Mail to send yourself a PDF copy of the document.

In Android, you can save a PDF of the document using Chrome: (1) tap the 3-dot icon in the upper right; (2) tap print; (3) choose "save to PDF" as your printer at the top; (4) tap download to save on your device.