AVCAL (the representative body for the Private Equity and Venture Capital industry) has released their Code of Private Equity Governance. The Code codifies many of the activities and governance mechanisms already being implemented by private equity industry participants. In fact, in many respects the Code does no more than set out what most industry participants would already expect of sophisticated fund managers operating in the industry and what most investors in private equity funds are likely to require as part of their own investment approvals.
In launching the Code, Katherine Woodthorpe (AVCAL's CEO) noted "The new Governance Code has been drafted with reference to other corporate governance codes around the world, including the ASX Corporate Governance Principles and Recommendations, to provide assurance to stakeholders that private equity firms are responsible stewards of their investors’ capital and of the businesses they invest in.”
While the initiative is commendable, there will undoubtedly be some fund managers in the industry for whom full compliance with the Code may be seen to be unduly burdensome, potentially because of the size of their funds and the nature of the investments they pursue (generally smaller, earlier stage investments). AVCAL have recognised this by requiring that its members that don't wish to comply with the Code are free to make such a decision, providing that they report to their investors that they aren't complying and explain why not.
If you'd like to understand how the Code may apply to you (whether you're an investor in a fund, fund manager or investee company), please get in touch.
Partner: Gerry Cawson
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