LP Consent Rights

LP Consent Rights are provisions that require LP approval (or LPAC approval) for certain decisions: fund term extensions, changes to investment period, material strategy deviations, key person remedies, related-party transactions, valuation policy changes, or amendments to economic terms. These rights exist to reduce governance risk and protect LPs from unilateral changes—but they also introduce decision friction and escalation pathways.

A mature GP treats consent rights as a governance process, not a legal formality. The GP must understand what requires consent, how consent is obtained (thresholds, timelines, LPAC role), and how communications are structured to avoid confusion and reputational damage.

How allocators define consent-rights risk drivers

• Trigger ambiguity: unclear definitions cause disputes and delays
• Threshold complexity: supermajority vs majority; class voting; side letter carve-outs
• LPAC dynamics: whether the LPAC is functional and trusted
• Timing risk: consent requests during volatility increase skepticism
• Communication quality: how rationale, alternatives, and impacts are presented
• Power concentration: a few LPs can effectively veto outcomes
• MFN asymmetry: different consent rights create fairness complications
• Escalation probability: contentious consents can spill into broader relationship deterioration

Allocator framing:
“Do consent requests feel like responsible governance—or like a GP trying to change the deal under pressure?”

Where consent rights matter most

• end-of-fund-life (extensions, realizations, NAV facilities, continuation deals)
• periods of underperformance or valuation stress
• strategy drift situations or unexpected market shocks
• funds with concentrated LP bases where a small group can block outcomes

How consent rights change outcomes

Strong discipline:

• protects LP trust by showing structured governance behavior
• reduces escalation by communicating early and with evidence
• avoids rushed, credibility-damaging consent pushes

Weak discipline:

• causes delays that worsen outcomes (missed exits, forced sales)
• creates LP factions and reputational damage
• triggers broader confidence erosion across the LP base

How allocators evaluate discipline

Confidence increases when GPs:

• map consent triggers clearly and socialize them before they are needed
• provide written rationales with alternatives and quantified impacts
• give sufficient time for review and questions
• use LPAC effectively and transparently
• document outcomes and follow through on agreed conditions

What slows decision-making

• surprise consent requests with short deadlines
• unclear voting thresholds and side letter inconsistencies
• insufficient evidence to justify the request
• dysfunctional LPAC dynamics or LP distrust

Common misconceptions

“Consent rights are rare.” → they surface exactly when things are stressful.
“LPAC approval equals LP support.” → broader LP base perception still matters.
“Short deadlines force action.” → they often trigger resistance and escalation.

Key allocator questions during diligence

• What decisions require consent and what are the thresholds?
• How do you run consent processes—timeline, materials, LPAC role?
• How do side letters change consent rights across the LP base?
• What is your playbook for contentious consents?
• How do you prevent governance from slowing value-maximizing actions?