SL Capital includes Brexit provisions in new debt fund

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SL Capital is one of the first private equity firms to include a Brexit clause into its fundraising documentation

The Edinburgh-based firm, which is hoping to raise £300 million for its first private debt fund, according to a person familiar with the matter, will be able to move its fund to Dublin if necessary after fundraising rules are agreed between the UK and the EU, the person said.

The highly unusual clause could become widespread, according to lawyers.

Jeremy Bell, a partner at law firm Ashurst, said that while he had not seen a fund with this type of clause before, he had been discussing similar legal provisions with his clients. He said: “It’s quite early days, but I think certainly there will be more of these types of clauses in the future.”

He added that alternatives funds have a history of trying to build flexibility into fund documents during periods of uncertainty. For instance, during the eurozone crisis, some funds added clauses that gave them the option of switching the currency of their fund from euros.

Kate Simpson, a partner at law firm Proskauer Rose, said her firm was looking at ways of building flexibility into fund documents to prepare for the various scenarios that could emerge from the UK’s Brexit negotiations – for instance looking at fund domiciles, defining which countries fall within the definition of Europe and adding extra risk factors to documents.

She said: “We are forensically looking at the documents to see where there might be a need to build in flexibility. We are trying to draft for uncertainty – you don’t want to tie the hands of the manager or investor.”

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