The manager should seek to mitigate the scale and duration of any ongoing liabilities when making management decisions towards the end of the vehicle life so that all underlying vehicle entities can be wound up as early as is reasonably possible.
The manager should keep investors advised of any ongoing liabilities once assets are sold and the impact on the timing of the ultimate winding up of the vehicle. Ongoing liabilities should be reported as a percentage of capital commitments s to each project and in aggregate.
The manager should limit the amount of capital that can be recalled by the manager once distributed to investors. The period in which the capital can be recalled should also be limited in time and clearly disclosed in vehicle documentation and reports.
The manager should keep investors regularly advised on the level of recallable capital and the manager’s expectations for its use.
Any investment restrictions imposed on a closed end vehicle should cease to apply during the liquidation phase of the vehicle.
During the vehicle wind-up process, any conflicts should be declared by the conflicted party at the earliest opportunity. If the conflict occurs because of the sales process, the investment manager should ensure an independent representative is involved, investor agreement is reached and valuations properly reflect market conditions. When a portfolio is to be sold and the investment manager potentially retained by the buyer, two deal teams should be created by the investment manager with ‘Chinese walls’ in place and senior representation on each team.
During the vehicle wind-up process, asset management and wind-up fees earned by the investment manager or involved third party should adequately reflect the amount of work involved. For example, any fixed fee asset management arrangement should be adjusted if few assets remain.