+ CG-S05 —
The fourth principle of the Corporate Governance module outlines the manager’s primary accountability for the vehicle, its investors and its profitable operations within legal frameworks. The non-executive officers are responsible to the investors while they themselves are accountable to their own relevant bodies. To assess the manager’s abilities and trustworthiness and to communicate any related concern, access to necessary information needs to be granted for the involved parties of the vehicle.
Indemnification: The vehicle should contain an indemnification and/or exculpation clause which, under specific circumstances, may reduce the accountability of the manager to the vehicle. The constitutional documents should explain if there are restrictions on losses to the vehicle arising from indirect or consequential loss.
Removal of manager at will: The vehicle framework should contain a removal at will or "no fault removal" clause, whereby the manager’s mandate can be terminated due to request of a majority of the investors. The documentation should clearly disclose the manager’s rights regarding outstanding fees and interest payments in such situations.
Removal of manager for cause: Vehicles should have a "removal for cause" clause in place that gives investors, dependent on a defined threshold, the right to call at any time for a vote to remove the manager. The vehicle documentation should clearly describe how cause can be established.
Non-executive board: If the vehicle has a non-executive board in place the selection criteria of the independent directors should be clearly defined in the vehicle documentation and focus on the depth and breadth of relevant experience. Procedures should be in place to ensure that material decisions are recommended by the manager for consideration and approval rather than just consultation by the committee. The non-executive officers may retain an external counsel at the expense of the vehicle and have access to appropriate insurance.
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