Not mid-fund. The Investment Company Act exemption is chosen at formation and embedded in your fund documents, including the limited partnership agreement, private placement memorandum, and subscription agreements. Switching a live fund from 3(c)(1) to 3(c)(7) would require every existing investor to meet the qualified purchaser standard, amendment of all governing documents, and potentially new subscription agreements from every investor.
You can use a different exemption for your next fund. If you anticipate needing more than 100 investors, structure the fund as a 3(c)(7) from the start. Here is the key trade-off:
- 3(c)(1): Accepts accredited investors, but limited to 100 beneficial owners
- 3(c)(7): Requires all investors to be qualified purchasers ($5 million in investments for natural persons, $25 million for entities), but removes the headcount constraint entirely
Some managers run parallel fund structures: a 3(c)(1) fund for accredited investors who are not qualified purchasers, and a 3(c)(7) fund for qualified purchasers who want to invest above the 100-person limit.
Plan your exemption strategy before your first close. The choice between 3(c)(1) and 3(c)(7) affects your investor base, your fund documents, your Form D filing, and your ongoing compliance obligations.
See Section 3(c)(1) vs. 3(c)(7) for a comparison of the two Investment Company Act exemptions.
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. Capital Company is not a law firm and does not provide legal advice.