A beneficial owner of a fund is any person who has investment discretion over, or receives the economic benefit of, an ownership interest in the fund. Beneficial ownership determines who counts toward the 100-person limit under Section 3(c)(1).
Why It Matters
The 100 beneficial owner limit under Section 3(c)(1) is not as simple as counting the names on your cap table. A single entity investor can represent multiple beneficial owners under the look-through rules. Miscounting beneficial owners can push your fund over the limit without anyone realizing it, potentially invalidating the fund's exemption from the Investment Company Act.
Key Details
- Natural persons who made the investment decision are counted as beneficial owners.
- Look-through applies when an entity investor owns 10% or more of the fund and was formed for the purpose of investing in the fund. In that case, the entity's underlying owners each count individually.
- Knowledgeable employees of the fund or its management company are excluded from the beneficial owner count.
- Trusts are counted based on the beneficiaries who have a present economic interest, not necessarily the trustee or grantor.
- Community property rules may allow spouses to count as a single beneficial owner in certain states.
For more, see The 100 Investor Limit.
Capital Company handles beneficial owner tracking and look-through analysis as part of fund administration.
This content is for informational purposes only and does not constitute legal, tax, or compliance advice. Consult qualified counsel for guidance specific to your situation.