No-Fault Divorce

Private Equity Glossary

An LPA provision granting LPs the contractual right to remove the GP without cause — distinct from for-cause removal (material breach, fraud, gross negligence). Requires supermajority LP consent (typically 75% or higher) and typically carries compensation obligations to the GP (payment of management fees through fund life, accelerated carry vesting on existing investments). No-fault removal is extremely rare in practice — the supermajority threshold is intentionally high and the compensation obligation makes it economically painful for LPs — but its existence provides crucial negotiating leverage to LPs in cases of pattern misconduct that falls short of for-cause triggers.

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