SBA Issues Revised Model Limited Partnership Agreement for Private Equity Funds Applying for SBIC Licenses

November 5, 2010

On Oct. 21, 2010, the U.S. Small Business Administration (SBA) released a revised model limited partnership agreement (New LPA) to assist investment funds applying for a license to operate as a small business investment company under the Small Business Investment Act of 1958.

The New LPA is designed to provide a basic form of agreement that an applicant can use by adding a limited number of provisions to adapt the model agreement to its own individual situation. For those applicants that use the New LPA, it is designed to shorten the length of the SBA review of the applicant’s legal documentation, by allowing the SBA to focus on the limited number of provisions added or modified by the applicant.

The New LPA integrates three elements into the agreement:

  1. Basic procedural and other standard provisions needed for an effective agreement of limited partnership formed under the Revised Uniform Limited Partnership Act.
  2. Basic business, tax and regulatory provisions commonly used in privately held limited partnerships which make long-term debt and equity investments.
  3. Specific provisions that SBA requires to be included in limited partnership agreements for SBICs that issue debentures.

Since the New LPA is a general form, and all of its provisions may not be appropriate for a particular applicant, care must be taken to ensure that each of the standard provisions is applicable to the applicant’s situation.

The Private Equity Practice Group at McGuireWoods LLP is dedicated to keeping clients advised of new legislative and business developments as they occur. If you have any questions regarding these issues, please feel free to contact your primary attorney at McGuireWoods LLP, or any of the authors.