Most Favored Nation (MFN) Side Letter Clause
(Private Equity Fund)

Summary

This Most Favored Nation (MFN) clause for private equity fund (PEF) side letter is to be used when an investor requests written assurance that it will have the same rights as some or all of the other investors in the PEF. The clause details when the investor will receive (a) notice that the PEF has granted separate and potentially preferential terms to another investor and (b) the benefit of such other terms. This clause includes practical guidance and drafting notes. This Most Favored Nation (MFN) Side Letter Clause (Private Equity Funds) is drafted assuming that the PEF is a domestic limited partnership. Note that the legal form and jurisdiction of a PEF can vary, and accordingly, the terms utilized in the Most Favored Nation (MFN) Side Letter Clause can also take on several formulations, depending on structure. For example, if a PEF is a corporation or company, rather than a partnership, the MFN would reference the Investment Manager (or equivalent) and the issuance of shares or units instead of interests. See Onshore/Offshore Structuring Issues for Private Equity Funds for a discussion of PEF structuring variations. This clause should be read in conjunction with the practice notes Private Equity Fund Documents: Drafting and Review and Side Letter Drafting for a Private Equity Fund. This clause assumes that it will be included in a side letter with a PEF. See Side Letter for a Private Equity Fund for an example. For a full listing of related first year associate investment management content, see First Year Associate Resource Kit: Investment Management.