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Hedge Fund LLC Operating Agreement for the United Kingdom

Hedge Fund LLC Operating Agreement Template for England and Wales

A comprehensive legal document governed by the laws of England and Wales that establishes the operational framework for a hedge fund structured as a Limited Liability Company. It sets out the rights, responsibilities, and relationships between the fund manager, investors, and other key stakeholders, while ensuring compliance with UK financial regulations, including FCA requirements and AIFMD provisions. The agreement covers crucial aspects such as investment strategy, capital contributions, profit distribution, and governance structure.

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What is a Hedge Fund LLC Operating Agreement?

The Hedge Fund LLC Operating Agreement is a foundational document for establishing and operating a hedge fund in England and Wales. It is essential when forming a new hedge fund or restructuring an existing one, providing the legal framework for the fund's operations, governance, and investor relations. The agreement ensures compliance with UK financial regulations while protecting the interests of all parties involved. It typically includes detailed provisions on investment strategy, risk management, fee structures, and exit mechanisms, making it crucial for both fund managers and investors.

What sections should be included in a Hedge Fund LLC Operating Agreement?

1. Parties: Identification of all members and managing entities

2. Background: Purpose of the fund and formation context

3. Definitions: Key terms used throughout the agreement

4. Fund Structure: Legal and operational structure of the fund

5. Capital Contributions: Rules regarding initial and subsequent capital contributions

6. Management and Administration: Governance structure and decision-making processes

7. Investment Strategy: Permitted investments and investment restrictions

8. Profit and Loss Allocation: Distribution waterfall and loss allocation mechanisms

9. Transfer Restrictions: Rules governing transfer of membership interests

10. Withdrawal and Redemption: Terms for member withdrawal and interest redemption

11. Reporting and Valuations: Requirements for financial reporting and asset valuation

12. Termination and Dissolution: Process for winding up the fund and distributing assets

What sections are optional to include in a Hedge Fund LLC Operating Agreement?

1. Side Letter Provisions: Special arrangements with specific investors, used when certain investors require specific terms

2. Co-Investment Rights: Terms for co-investment opportunities, included when offering co-investment rights to certain members

3. Seed Investor Terms: Special provisions for seed investors, included when the fund has seed investors

4. ERISA Provisions: Special provisions for US pension fund investors, included when accepting US ERISA plan assets

5. Key Person Provisions: Provisions relating to key investment personnel, included when specific individuals are crucial to the strategy

What schedules should be included in a Hedge Fund LLC Operating Agreement?

1. Schedule 1 - Investment Guidelines: Detailed investment restrictions and guidelines

2. Schedule 2 - Subscription Agreement: Standard form for new investors joining the fund

3. Schedule 3 - Fee Structure: Detailed breakdown of management and performance fees

4. Schedule 4 - Valuation Policy: Methodology for valuing fund assets

5. Schedule 5 - Risk Factors: Detailed disclosure of investment risks

6. Schedule 6 - Anti-Money Laundering Requirements: AML documentation and verification requirements

7. Schedule 7 - Form of Transfer Notice: Standard form for transferring membership interests

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

England and Wales

Publisher

Genie AI

Document Type

Operating Agreement

Sector

Sales

Cost

Free to use
Relevant legal definitions


























































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Industries

Companies Act 2006: Primary legislation governing company formation, operation, and dissolution in the UK, setting out directors' duties and corporate governance requirements

Financial Services and Markets Act 2000 (FSMA): Key legislation regulating financial services in the UK, establishing regulatory framework and FCA authority over financial institutions

Limited Liability Partnerships Act 2000: Legislation governing the formation and operation of LLPs in the UK, relevant for alternative business structures

Partnership Act 1890: Foundational legislation establishing general partnership principles that may apply to fund structures

FCA Regulations: Regulatory framework established by the Financial Conduct Authority governing conduct, prudential requirements, and operational standards for financial services firms

Alternative Investment Fund Managers Directive (AIFMD): EU-derived regulation setting standards for hedge fund and private equity fund managers, including reporting and risk management requirements

Markets in Financial Instruments Directive II (MiFID II): Regulatory framework governing financial markets and improving protections for investors, including trading transparency and client asset protection

Market Abuse Regulation (MAR): Legislation aimed at preventing market manipulation and insider trading, establishing framework for market integrity

Financial Services and Markets Act 2000 (Regulated Activities) Order 2001: Detailed regulation specifying which activities require FCA authorization and the scope of regulated activities

FCA Collective Investment Schemes Sourcebook (COLL): Specific regulations governing the operation and management of collective investment schemes including certain hedge funds

Money Laundering Regulations 2017: Anti-money laundering requirements including customer due diligence, risk assessments, and reporting obligations

Proceeds of Crime Act 2002: Criminal law framework dealing with money laundering and proceeds of crime, including reporting requirements

UK GDPR: Post-Brexit data protection regulation establishing requirements for processing personal data

Data Protection Act 2018: UK's implementation of data protection standards, working alongside UK GDPR

Corporation Tax Act 2010: Primary legislation governing corporate taxation in the UK, including provisions affecting investment vehicles

Income Tax Act 2007: Legislation governing income tax, relevant for profit distribution and investor taxation

Employment Rights Act 1996: Core employment legislation establishing employee rights and employer obligations

Equality Act 2010: Legislation prohibiting discrimination and promoting equality in the workplace and service provision

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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