LPIV Capital and Capital Accounts Flashcards
Do Units have certificates?
No, but manager can make rules regarding issuance of Units, including issuing certificates.
How are additional contributions made?
The Manager makes a call for contributions. Manager determines amount and timing. All capital contributions require the approval of the manager.
Are there any special requirements for an Additional Capital Contribution for an Investment?
Yes. The Manager much adopt a Capital Budget for the Investment.
What is required to establish a Capital Budget?
Capital Budget must be made in consultation with Local Operating Company and approved by the PDC Investment Committee (Section 3.7). Not clear what happens if an Investment is approved by IC prior to the approval of the final budget (which is theoretically possible).
How does the PDC Investment Committee approve a Capital Budget?
The budget is submitted to the PDC Investment Committee along with the request for final approval of the investment (but the budget can be approved later if it is not final with the IC provides the approval.
Are members obligated to make an additional capital contribution?
No
When can members make an additional capital contribution?
Only when requested by Manager.
Do the member have a right to partition?
No.
What can capital contributions be used for?
Making an Investment, pay expenses, or making additional capital investments
How are contributions made?
Wire transfer in immediately available funds.
Can the Company get loans from members?
Yes. The Manager can ask any (or all) members to loan (i.e. “Advance”) any capital. But unless all Members who have made all the Additional Capital Contributions have been given the opportunity, loans can only be 60 days.
What are the terms of a loan from a member?
10% per annum compounded quarterly. They are not treated as Capital Contributions. The term cannot be longer than 60 days unless each Member that has made all their Capital Contributions is given the chance to make the advance.
Do the Members have protections if the project requires more than the amount in a Capital Budget?
Yes. The Member may still agree or not agree to fund an Additional Capital Contribution. But any member that agrees to make any Additional Capital Contributions (including those it may make on behalf of another Member) as “Capital Above Budget Contribution.” This Capital Above Budget Contributions has a preference in distributions, and gets paid out of Cash Available for Distribution before any other distribution except for interest and principal on advances. (Section 7.3(b)(i)
What increases a Member’s Capital Account?
(i) Capital Contributions;
(ii) Amount of Company liability assumed by the Member (0r secured by property distributed to Member),
(iii) Allocable share of Net Income or Special allocations income or gain,
(iv) can be increased by giving effect to the Sec. 704(b) impacts (adding gain inherent in property distributed as if the property had been sold), and
(iv) if unequal distributions are made, reducing by losses inherent in property distributed as if there had been a liquidation.
What decreases a Members Capital Account?
(i) Cash and the FMV of property distributed to the Member,
(ii) allocable share of loss or deduction,
(iii) can be decreased by giving effect to the Sec. 704(b) impacts (reducing by losses inherent in property distributed as if the property had been sold),
(iv) if unequal allocations are made, reducing by losses inherent in property distributed as if there had been a liquidation.
