Sacred Rights, Silent Risks: A Closer Look at LPA Amendment Provisions
>> In most LPAs, the amendment provision is buried deep in the “Miscellaneous” section at the back of the document. But despite its modest placement, it’s one of the most critical provisions for allocators. After all, what good are a carefully negotiated LPA and a hard-earned side letter if key terms can be rewritten—to your disadvantage—after the fact? Most LPAs follow a similar structure:
General amendments require the consent of at least a majority of LPs (and typically 66⅔%);
A set of “sacred rights” can’t be amended—or only with the consent of the affected LPs; and
Ministerial changes can be made unilaterally by the GP.
This framework gives the illusion of standardization. But in practice, there’s significant variation across the market—and not all amendment provisions provide the same level of protection.
Given the stakes, you’d expect amendment provisions to be airtight. But many are far weaker than LPs realize—featuring low consent thresholds, omitting key sacred rights, or even failing to protect the amendment clause itself from amendment.
To illustrate the risks, let’s examine a real-world example drawn from one of the many LPAs we review here at DocsDiligence. At first glance, the clause below has all the markings of the standard structure—but a closer read reveals cracks that LPs might miss.
Sample Amendment Provision:
Amendments. (a) Except as required by law, this Agreement (including the Annexes hereto) may be amended or supplemented by the written consent of the General Partner and a Majority in Interest of the Combined Limited Partners (or only the Limited Partners of this Partnership if no other Parallel Fund is being amended); provided, that no such amendment shall (i) increase any Limited Partner's Capital Commitment, reduce its share of the Partnership's distributions, income and gains, increase its share of the Partnership's losses, or increase its share of the Management Fee payable by such Limited Partner without the written consent of each Limited Partner so affected, (ii) change the percentage of interests of Limited Partners (the ''Required Interest") necessary for any consent required hereunder to the taking of an action unless such amendment is approved by Limited Partners who then hold interests equal to or in excess of the Required Interest for the subject of such proposed amendment, (iii) make any amendment or supplement to Sections 4.9 or 8.7 hereof or any other provision of this Agreement which deals with ERISA without the consent of a Majority in Interest of the ERISA Partners or Regulated Plan Partners subject to Similar Law, (iv) make any material amendments to Section 4.8 hereof so as to adversely affect the rights and protections of the Tax Exempt Limited Partners, without the consent of a Majority in Interest of the Combined Tax Exempt Limited Partners, (v) modify the liability of a Limited Partner under Section 5.2 in a manner adverse to such Limited Partner without the consent of such Limited Partner or (vi) make any amendment to Section 5.1(c) or any provision of this Agreement specifically dealing with the, rights of BHC Partners that are exclusive to such BHC Partners, without the consent of 66-2/3% in Interest of the Partnership’s and any Parallel Fund's BHC Partners adversely affected thereby. Notwithstanding the foregoing, this Agreement may be amended by the General Partner without the consent of the Limited Partners to (v) change the name of the Partnership pursuant to Section 2.2 hereof, (w) update the books and records of the Partnership pursuant to this Agreement, (x) cure any ambiguity or correct or supplement any provision hereof which is incomplete or inconsistent with any other provision hereof or correct any printing, stenographic or clerical error or omissions …
50% Threshold: Common But Not Comforting
The LPA allows general amendments with the consent of the GP and just 50% of LP interests:
“...this Agreement (including the Annexes hereto) may be amended or supplemented by the written consent of the General Partner and a Majority in Interest of the Combined Limited Partners...”
Most LPAs we review set the threshold at 66⅔ or higher, but 50% is far from unusual. Still, just because it’s common in the market doesn’t mean that it’s investor-friendly—or that it adequately protects your interests.
In the rest of our writeup, we look at:
Situations Where 50% Does Not Adequately Cover all LPs' Interests
Sacred Rights: What’s Covered and What’s Missing
The Biggest Missing Sacred Right of All
GP Ministerial Discretion, With a Narrow Objection Window
and Key Takeaways: What LPs Should Be Looking For
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