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Copyright © 2022 3one4 Capital | All Rights Reserved.
With our investor’s best interests at our utmost priority, we have a fiduciary duty to the assets we are in charge of. We also have in mind the possibility of conflicts of interests between interested parties in the course of carrying out our responsibilities as investment manager. In order to ensure strict management of such issues, we have thus enacted a separate Policy for Conflicts of Interests.
As part of our policy for the prevention of conflicts of interests, we have established information exchange barriers (Chinese Wall). Such information exchange barriers serve to prevent undisclosed material information from being accessed by unauthorized employees, departments, or external parties.
Investment Manager may, from time to time, face conflicts of interest in relation to discharge of its responsibilities towards the Fund. There may be occasions when the interests of the Investment Manager may conflict with the interests of the Fund and the investors in various ways. Conflict of interests may also arise for the Portfolio Companies. The Fund and the Investment Manager will use their best endeavours and the process set forth below to resolve any conflict on a fair basis. The Investment Manager shall take all actions and make all arrangements required by the Regulations in order to manage actual or potential conflicts of interest, including establishing and implementing written policies and procedures to identify, monitor and appropriately mitigate conflicts of interest, if any.
On any issue involving actual conflicts of interest, the Investment Manager will be guided by its good judgment as to the best interest of the Fund after consultation with the LPAC and the Trustee. Generally, none of the Investment Manager, its employees or affiliates shall co-invest with the Fund on better terms than the Fund, having regard to all relevant factors, in a Portfolio Company. To the extent that any course of action or inaction is permitted by the Fund Documents or the Investment Advisory Committee does not specifically advice against such course of action or inaction, the Investment Manager and its affiliates shall have no liability to the Fund or any to Contributor in respect to actions or inactions taken by them with respect to such matter in good faith.
“3one4” means, 3one4Capital Advisors LLP, 3one4 Capital Management LLP, 3one4Capital Trust, 3one4 Capital India Internet Dynamics, 3one4 Capital IFSC Fund and all the Schemes floated by 3one4Capital Trust or 3one4 Capital India Internet Dynamics.
“Conflict of Interest” refers to instances where personal or financial considerations may compromise or have the potential to compromise the judgment of professional activities. A conflict of interest may be actual, potential or perceived and may be financial or non-financial.
“Investment Advisory Committee” means a committee appointed by the Investment Manager for providing advisory services to 3one4.
“Investment Manager” means 3one4Capital Advisors LLP or 3one4 Capital Management LLP or 3one4 Capital FME IFSC LLP.
“Limited Partner Advisory Committee” or “LPAC” shall mean the advisory committee of the Fund established by the Investment Manager, no later than 3 (three) months from the Final Closing Date consisting of at least 3 (three) members that are appointed by the Investment Manager (as per the LPAC Charter), each of which shall be a representative of a Class A Unit holder, provided that no Class A Unit holder shall be represented by more than one member on the LPAC.
“Policy” or “This Policy” means this Conflict-of-Interest Policy.
“Portfolio Company(ies)” means any company, special purpose vehicles, limited liability partnerships, body corporate, enterprise or ventures incorporated in India, into which the Scheme makes an investment in accordance with the objects of the Scheme, AIF Regulations and Applicable Law, either directly or indirectly through purchase of such unlisted securities and such securities as stipulated in the AIF Regulations. To the extent permitted under AIF Regulations and Applicable Law and subject to receipt of all necessary regulatory approvals, portfolio companies shall also include any company, special purpose vehicles, limited liability partnerships, body corporate, enterprise or venture incorporated outside of India.
“Schemes” shall mean the various schemes launched by 3one4Capital Trust or 3one4 Capital India Internet Dynamics, from time to time.
The employees, officers and partners of the Investment Manager shall undertake reasonable steps to avoid actual or potential conflict of interest situations. In the event of any doubt as to whether a particular transaction would create (or have the potential to create) a conflict of interest, employees, officers shall consult with the Investment Managers/ LPAC.
The Investment Manager shall undertake the following steps to avoid actual or potential conflict of interest situations.
The Fund may purchase investments from, or sell investments to, the Interested Persons. In such cases, conflicts may arise in determining the price and terms of the sale or purchase as the case may be. The Interested Persons and their personnel may have information about the Fund's investment policies and strategy that would assist the Interested Persons wishing to purchase from or sell investments to the Fund. In order to address the conflicts inherent when the Fund is purchasing an investment from, or selling an investment to, any Interested Persons or their affiliates, the Fund will seek the advice of the Investment Advisory Committee prior to participation in such investments and endeavour to implement any such suggestions which the Investment Advisory Committee may provide in this regard.
The Fund may make investments in Portfolio Companies in which other investment funds, to which Affiliates of the Investment Manager provide investment services, are currently invested or may in the future invest. The Investment Manager will use its good faith judgment as to the best interests of the Fund in addressing any potential conflicts of interest which may arise from such situations. The Investment Manager shall specifically seek the advice of the Investment Advisory Committee about all such co-investments.
In the event that the Fund is investing in a Portfolio Company that is a portfolio company of another fund or scheme managed by the Investment Manager or its Affiliates and as a result of such investment, the Fund is purchasing shares in such Portfolio Company from such other fund or scheme managed by the Investment Manager and/or its Affiliates, then the Investment Manager shall appoint one of the “Big 4” accounting firms or other firms of commensurate reputation to value such shares in accordance with the Regulations and other applicable laws and such valuation shall be binding on the Fund and the Investment Manager.
It is possible that there will be conflict between the interests of the Fund and the interests of one or more other ventures that the Investment Manager and its Affiliates are involved in. The Investment Manager and its Affiliates will do their best to mitigate risk of such conflict for the benefit of Contributors holding Class A Units.
The Investment Manager will be subject to conflict of interests in allocating investment opportunities among the Fund and other ventures managed by the Investment Manager and its Affiliates. Investment opportunities identified by the Investment Manager may be suitable for both the Fund and such other ventures. In some cases, the Investment Manager may arrange for the Fund and another venture to co-invest in a company that is suitable for each of them provided that the terms are not less favourable in accordance with the AIF Regulations.
In addition, Portfolio companies of the Fund may come into competition with other companies in which members of the Investment Manager or the Sponsor have an interest via different investment funds or other means.
The Investment Manager will endeavour to resolve all conflict in allocating investment opportunities among the Fund and the other ventures fairly, considering, among other things (a) the advice of the LPAC; (b) the investment objectives and policies of each fund; (c) the remaining un invested capital of each fund; (d) the level of diversification of each fund; and (e) the basis on which prior conflicts in allocating investment opportunities have been resolved. However, the Investment Manager reserves the right, in its discretion, to allocate investment opportunities to other ventures.
The services of the Investment Manager will not be exclusive to the Fund and subject to the limits described above under the preceding paragraph (Conflicts Relating to Other Ventures), the Investment Manager is free to render investment management and other services to others and to be involved in a variety of investment and non-investment activities unrelated to the Fund so long as the services to be performed by it for the Fund are not impaired thereby and to retain for its own use and benefit all fees, other compensation, expense reimbursements, and other payments received in connection with such services. The Investment Manager may have conflict of interest in allocating management time, services, functions and investment opportunities among these other activities on the one hand and the Fund on the other hand. Neither the Fund nor its Contributors will have rights in or to cash receipts or profits of the Investment Manager from such other services and activities.
The Investment Manager and its management personnel will only devote so much of their time to the Fund's business as is, in their judgment, reasonably required. The Interested Persons and their employees that provide services to the Fund will have, in addition to their responsibilities for the Fund, responsibilities for other projects and clients. Accordingly, they may have conflicts of interests in allocating management time and other resources among the Fund and such other projects and clients.
Under certain circumstances, partners, members or affiliates of the Investment Manager or the Sponsor or an Advisory Company may make venture/private equity investments separate and apart from, or alongside with, the Fund. Further, under certain circumstances, the Fund may invest in companies in which partners or members of the Investment Manager or the Sponsor have a pre-existing interest or subsequently acquire an interest via different investment funds or other means. Among other considerations, when partners or members of the Investment Manager or the Sponsor hold interests in Portfolio Companies other than through the Fund, those interests may substantially differ from the Fund's interests in such companies due to differences in liquidation preference, voting rights or other investment terms. This may result in such members having personal investment interests that directly conflict with the interests of the Fund.
The Investment Manager and its Affiliates may invest and trade for their own accounts and may take action with respect to their own accounts that differs from action taken with respect to the Fund. These differences may result from several factors, including (a) differences in investment account objectives; (b) volatility and turnover tolerance; (c) the degree to which accounts are fully invested; (d) time horizons; (e) derivative instruments permitted to be used; and (f) underlying positions to be hedged. The possible taking of inconsistent investment positions could result in a situation where the position taken for the Fund is unprofitable while the opposite position taken on behalf of another account managed by the Investment Manager or one or more of its Affiliates for their own account is profitable.
The Fund will generally seek the right to participate in the management of its Portfolio Companies. In some cases, a representative of the Investment Manager may assume a seat on the board of directors of an Portfolio Company. As a director of a Portfolio Company such person may owe a separate duty of loyalty to the Portfolio Company that may be in conflict with the interests of the Fund or may limit actions that otherwise might be taken to protect the interests of the Fund. This potential conflict is accentuated by the additional responsibilities to act in the best interests of the company and the enhanced consequences cast upon directors who fail to discharge their duties diligently under the Companies Act, 2013. The Investment Manager will endeavour to resolve all such conflicts in a reasonable manner, but there can be no assurance that any such resolution will be in the manner most favourable to the Fund. There can also be no assurance that such conflicts will not adversely affect the interests of the Fund.
The Investment Manager will have substantial discretion in identifying, structuring, and negotiating acquisitions and dispositions of investments for the Fund. The Investment Manager and its Affiliates will receive substantial payments of fees, compensation and expense reimbursements from the Fund as set forth herein. Such payments will reduce the amount of cash available for Distribution. In addition, these payments may create an incentive for the Investment Manager to make investments for the Fund that are riskier or more speculative than would be the case in the absence of these payments. Further, the Management Fee payable by the Fund to the Investment Manager, and any returns that the Investment Manager will receive pursuant to its investments in the Class B Units, have not been established on the basis of an arm’s-length negotiation between the Fund and the Investment Manager. However, the Investment Manager believes that the Management Fee and the terms of such returns generally reflect prevailing market terms.
The Investment Manager will hold Class B Units of the Fund, through which they will be entitled to receive Carried Interest at the time of Distribution. The interests of the Investment Manager as a Class B Unitholder and recipient of the Carried Interest may conflict with the interests of The Investors holding Class A Units. The Carried Interest may create an incentive for the Investment Manager to recommend investments to the Fund that are riskier or more speculative than would be the case in the absence of the Carried Interest. A more aggressive investment strategy may increase the value of Carried Interest realized by the Investment Manager at Distribution.
It is expected that, from time to time, the Investment Manager and its Affiliates or persons associated with it may provide services to the Portfolio Companies, provided that the terms of any such contract or transaction are fair and reasonable to the Fund. In addition, the Investment Manager and its Affiliates or persons associated with it may receive certain cash and non-cash fees from Portfolio Companies in connection with the purchase, monitoring or disposition of Investments or in connection with unconsummated transactions (e.g., transaction, directors’, consulting, management, investment banking, advisory, closing, breakup and other similar fees). Provided, however that the Investment Manager is required to credit 100% of its share of any such fees against the Management Fee.
The Trustee and/or the Investment Manager and its affiliates may from time to time incur expenses on behalf of the Fund and one or more existing or subsequent entities established by the partners of the Investment Manager. Although the Trustee and/or the Investment Manager and its affiliates will attempt to allocate such expenses on a basis that it considers equitable, there can be no assurance that such expenses will, in all cases, be allocated appropriately.
The Investors may have conflicting tax and other interests with respect to their Portfolio Investments in the Fund. The conflicting interests of individual Contributors may relate to or arise from, among other things, the nature of Fund investments, the structuring or the acquisition of investments and the timing of disposition of Fund’s Investments. As a consequence, conflicts of interest may arise in connection with decisions made by the Trustee or Investment Manager, including with respect to the nature or structuring of investments that may be more beneficial for one investor than for another investor, especially with respect to investors’ individual tax situations. In selecting and structuring investments appropriate for the Fund, the Trustee and the Investment Manager will consider the investment and tax objectives of the Fund and its investors as a whole, and not the investment, tax or other objectives of any Contributor individually.
The advocates, accountants, and other professionals who perform services for the Fund may, and in some cases do, also perform services for the Investment Manager and its Affiliates, Fund and Portfolio Companies. It is anticipated that such representation will continue in the future.
Investment Manager will make its best efforts to avoid such conflicts and ensure that any conflicts of interest are resolved in the best interests of unit holders.
Subject to the AIF Regulations, which may include the approval of the Super Majority for participation in any such conflicted transaction, the Investment Advisory Committee of the Scheme may enter into or approve a transaction or arrangement or any investment (“Conflicted Transactions“) notwithstanding that either the Trustee or Investment Manager, or any of their respective Partners, directors, officers, employees or agents (each person, individually or collectively referred to as “Interested Person”) has any direct or indirect interest or concern in such Conflicted Transaction, so as to place the Interested Person in a position where such relationship conflicts with their respective fiduciary obligations to the Trustee and the Investment Manager. The Scheme and the Investment Manager will use their best endeavours to resolve any conflict on a fair basis. However, there can be no assurance that instances of conflict of interests will be resolved on the basis most favourable to the Scheme and the Investors.
The following are some of the mitigants which shall be used to address Conflicts of Interest
(i) All Investment decisions shall be in accordance with the Fund Strategy and Fund Documents.
(ii) If the Interested Party is an individual who is a partner or employee of the Investment Manager or a member of the Investment Advisory Committee, such person shall be required to recuse herself/himself from voting or participating in deliberations with respect to the approval of the Conflicted Transaction.
(iii) In the event that the Scheme is investing in a Portfolio Company that is a portfolio company of another fund or scheme managed by the Investment Manager or its Affiliates and as a result of such investment, the Scheme is purchasing shares in such Portfolio Company from such other fund or scheme managed by the Investment Manager and/or its Affiliates, then the Investment Manager shall appoint one of the reputed accounting firms to value such shares in accordance with the AIF Regulations and other applicable laws and such valuation shall be binding on the Scheme and the Investment Manager.
(iv) All Conflicted Transactions will be referred to the LPAC for their advice. In case where a member of LPAC is an interested party, she/he shall recuse themselves from such a meeting and her/his vote and opinion shall not be considered in such a decision. In the event that all members of the LPAC are conflicted, the Investment Advisory Committee shall recommend to the LPAC a suitable alternative method that it deems appropriate in the circumstances on how best to resolve such Conflict.
(v) The Investment Manager shall maintain transparency by disclosing to The Investors any fees charged to the Scheme/Portfolio Company/ by an Associate of the Investment Manager in an Interested Party Transaction.
The Conflicts Committee shall review the manner in which conflict of interest are arising and how they are being resolved annually (or earlier if there are any material developments) and adopt necessary actions and disclose any material developments.
There shall be no restriction on the Investment Manager or any of its Key Person Affiliates in respect of, sponsoring, raising or managing, advising, incubating or acting as a general partner or an investment manager to, other limited liability companies, partnerships, trusts, funds or other investment vehicles which may have an investment objective or investment strategy similar to the existing funds and/or any angel funds which may be floated by the Investment Manager, under any brand name.
The Investment Manager may sponsor, raise or manage, advise, incubate or act as a general partner or an investment manager to, other limited liability companies, partnerships, trusts, funds or other investment vehicles which may have an investment objective or investment strategy similar to that of the Scheme, when the Drawdown Notice issued by the Scheme exceeds 50% (fifty percent) of the total Capital Commitment in the Scheme. Further, the Investment Manager shall not file the paperwork for a new scheme (outside of the schemes already approved) until the above 50% (fifty percent) drawdown notice has been achieved.
For any queries / concerns regarding the Conflict-of-Interest Policy, please write an email to partners@3one4capital.com.
Copyright © 2022 3one4 Capital | All Rights Reserved.
