Carried interest clawback Definition | Legal Glossary | LexisNexis (2024)

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Carried interest clawback Definition | Legal Glossary | LexisNexis? ›

A clawback provision (usually seen where a fund uses a deal-by deal model) that ensures that the carried interest partner does not receive more than its agreed percentage of carried interest over the life of the fund.

The term clawback can also be found in some other settings. It refers to the limited partners' right in private equity to reclaim a portion of the general partners' carried interest in cases where subsequent losses mean the general partners received excess compensation.

The term clawback or claw back refers to any money or benefits that have been given out, but are required to be returned (clawed back) due to special circ*mstances or events, such as the monies having been received as the result of a financial crime, or where there is a clawback provision in the executive compensation ...

It depends on several factors, including state laws, federal laws, and the specific circ*mstances of the commission clawback. However, there are some situations where clawbacks may be illegal, such as when they violate state wage laws, employment contracts, or collective bargaining agreements.

Carried interest, income flowing to the general partner of a private investment fund, often is treated as capital gains for the purposes of taxation. Some view this tax preference as an unfair, market-distorting loophole.

Compliant policies will require companies to clawback incentive-based compensation erroneously received by current or former executive officers after an accounting restatement. Companies must also publicly disclosure their policies as part of their first annual report filed on or after Dec. 1, 2023.

Clawback Agreement Example

For example, a senior executive may have been awarded $1 million dollars in stock, based on company performance. Then years later, it may be discovered that the company performance calculations were inaccurate or fraudulent.

OAS Clawback Threshold

For the tax year of 2022, the Old Age Security clawback begins when you earn $81,761 or above; this is called the minimum income recovery threshold. There is also a maximum income recovery threshold, which, for 2022, is $134,626 for people aged 65-74 and $137,331 for people aged 75-plus.

To recover or retake, with great effort, something that was lost. regain. retrieve. recoup. recover.

The phrase 'claw-back” clause has often been used to refer to those provisions of the African Charter that seek to minimize or limit some of the rights guaranteed under the Charter.

What happens if you don't pay a clawback? ›

In the case of a clawback, the producer has to repay money they previously considered part of their earnings. If they can't immediately repay the commission, it becomes a debt they owe, which can even make another firm less likely to hire or contract them.

20.2010-1(c) (known colloquially as the 'anti-clawback' regulations), which addressed instances where the credit related to the basic exclusion amount applicable at the time of death for estate tax purposes is less than the credit allowable in computing the gift tax payable with respect to the gifts that the decedent ...

What is a clawback agreement? It is an agreement permitted by Federal Rule of Evidence 502 allowing parties to “claw back” inadvertently produced attorney work product or attorney-client privileged information.

Carried interest is a share of the profits of an investment paid to the investment manager in excess of the amount that the manager contributes to the partnership, specifically in alternative investments, e.g., private equity and hedge funds. It is a performance fee rewarding the manager for enhancing performance.

What does Carried interest clawback mean? A clawback provision (usually seen where a fund uses a deal-by deal model) that ensures that the carried interest partner does not receive more than its agreed percentage of carried interest over the life of the fund.

The Carried Interest Fairness Act requires carried interest income to be taxed at ordinary wage rates.

If the GP is ultimately entitled to less carry than the tax distributions it received inception to date, and if the agreement contains a clawback provision, the GP would be required to pay back its tax distributions whether or not it receives a tax benefit for losses allocated in later years.

Carried interest, or “carry” for short, is the percentage of a private fund's investment profits that a fund manager receives as compensation. Used primarily by private equity funds, including venture capital funds, carried interest is one of the primary ways fund managers are paid.

A “clawback” refers to a legal or contractual provision that allows a party to recover or take back previously distributed funds, benefits, or assets in specific circ*mstances. It is often used to rectify overpayments or to address situations where certain conditions or obligations are not met.

In venture and private equity circles, a clawback obligation represents the general partner's promise that the managers will not receive a greater share of the fund's distributions than they bargained for.