GP Removal (For Cause / No-Fault)

GP Removal clauses define the conditions under which Limited Partners can remove the General Partner from control of the fund. While rarely used, removal rights function as a governance backstop that shapes manager behavior long before any vote occurs.

From an allocator perspective, GP removal is less about enforcement and more about power balance — revealing whether LPs hold real governance authority or only symbolic protections.

How allocators define GP removal risk drivers

Allocators evaluate GP removal through:

• Trigger thresholds: vote % required for action (for-cause vs no-fault)
• Cause definition: objective vs subjective “for cause” events
• No-fault feasibility: whether removal is practically usable
• Economic consequences: carry forfeiture/vesting and fee continuity
• Replacement mechanics: interim authority and successor process
• Timing & friction: how quickly governance can be executed
• Dispute risk: likelihood of litigation delaying control change

Allocator framing:
“Is this a real governance mechanism — or a theoretical clause designed never to be used?”

Where GP removal matters most

• first-time or emerging managers
• funds with concentrated decision-making
• long-duration vehicles (private credit, infrastructure, venture with long tails)
• strategies with high key-person dependency
• situations where conflicts can emerge (continuations, cross-fund allocations)

How GP removal changes outcomes

Strong removal structure:

• creates behavior discipline and accountability early
• reduces tolerance for repeated governance drift
• supports LP confidence in downside protection

Weak removal structure:

• concentrates power with minimal recourse
• limits LP leverage during disputes
• increases tail risk in stressed scenarios

How allocators evaluate enforceability

Conviction increases when managers:

• cleanly separate for-cause vs no-fault mechanics
• define objective, provable cause triggers (not narrative language)
• apply meaningful post-removal economics (carry, fees, expenses)
• clearly document transition authority and decision rights
• show governance maturity (LPAC precedent, reporting discipline)

What slows allocator decision-making

• thresholds set unrealistically high (effectively non-executable)
• vague “cause” language that invites disputes
• carry retained after removal with no real penalty
• unclear interim control and replacement workflow

Common misconceptions

• “Removal clauses are boilerplate.” → details vary materially.
• “No-fault removal is unrealistic.” → feasibility is mostly economic + procedural.
• “Removal equals fund failure.” → often prevents deeper value erosion.

Key allocator questions during diligence

• What vote threshold applies for for-cause vs no-fault removal?
• What happens to carry, fees, and expenses post-removal?
• Who controls the fund during transition—immediately?
• What are the practical timelines to execute governance?
• Have you ever had LP governance actions in prior vehicles?