The FAR® Program solves several major problems facing private equity Managers.
How the FAR® Program Works
Your firm establishes a FAR Fund, which can be a feeder fund or a master fund. This can be a domestic LLC, domestic Series LLC, offshore corporation or offshore segregated portfolio company.
The Fund adopts a FAR Plan that spells out the profit sharing.
Your Investor contributes to the Fund. When investments are made, the Fund grants FARs to the Manager which provide the specified profit sharing.
As Deals are realized, you can either exercise and withdraw, or continue the FARs to incentivize your Investor to reinvest. Your share of the profits grows pre-tax, tax-deferred until you elect to withdraw them.
With respect to each Contribution and investment in a Deal, the Fund grants such number of FAR®s that will provide the agreed upon profit sharing. The FAR®s share in the absolute cumulative profits on the Contribution until the Contribution is redeemed.
The Fund can be designed so that the FARs continue as long as the Investor stays in the Fund. This can be a powerful tool for retaining capital.
The Manager (or Partner) can exercise a FAR at any time before its Expiration. Upon Expiration the FAR is Exercised automatically. Typically, FARs expire 20 years after the Grant.
The FAR holder may Exercise by paying the Strike Price or by electing to “net settle.” If the FAR holder pays the Strike Price to the Fund, the Fund will issue the Underlying Share to the FAR holder. If the FAR holder elects to net settle, the Fund will issue to the FAR holder such number of Shares that have a fair market value equal to the Spread.