Key Person Event

A Key Person Event is the contractual condition that activates key person protections — typically pausing new investments until a cure is satisfied or LPs approve a restart. The event definition is where governance becomes real (or purely cosmetic).

From an allocator perspective, a key person event is a risk boundary: it is the mechanism that stops the fund from drifting into a different decision-making regime without LP consent.

How allocators define event-quality risk drivers

Allocators evaluate the event definition through:

• Event clarity: objective vs subjective standards
• Departure triggers: resignation, termination, removal, or role change
• Time allocation triggers: measurable % thresholds and monitoring rights
• Capacity triggers: illness/incapacity definitions and documentation
• Multiple-person logic: one person vs two-person vs majority trigger
• Cure mechanics: acceptable remedies (replacement, return, LP approval)
• Restart mechanics: LP vote threshold and whether GP can delay votes
• Disclosure obligations: timing, format, and completeness of notification

Allocator framing:
“Would this trigger early enough to protect us — or only after damage is done?”

Where key person events matter most

• concentrated teams where one partner drives sourcing/IC
• specialized strategies where expertise is not easily substitutable
• managers scaling rapidly while launching multiple funds

How event design changes outcomes

Strong event design:

• forces early transparency and controlled pause
• prevents “quiet continuation” after key departures
• supports stable portfolio construction decisions

Weak event design:

• delays trigger until after the team has already changed
• permits investing to continue during uncertainty
• encourages governance disputes due to vague language

How allocators evaluate circumvention risk

Conviction increases when managers:

• use objective time-allocation and role definitions
• prohibit investment continuation through side vehicles during suspension
• define prompt LP vote windows and required disclosures
• document monitoring/reporting on key person time commitments

What slows allocator decision-making

• event requires too many simultaneous departures to trigger
• subjective standards like “materially adverse” with no measurement
• cure defined as “GP determines appropriate replacement”
• no disclosure discipline or delayed notification rights

Common misconceptions

• “Only departures matter.” → time-allocation drift is often the real risk.
• “Triggering a key person event is catastrophic.” → it’s controlled governance.
• “Replacement is always a cure.” → not if the edge was person-specific.

Key allocator questions during diligence

• What specific events trigger the clause?
• How quickly must the GP notify LPs?
• What is suspended and what is allowed during suspension?
• What remedies qualify as a cure?
• Can the GP delay restart votes or continue investing elsewhere?