Definition
Default Remedies
What the operating agreement lets the sponsor do when an LP signs but fails to fund.
Default remedies are the contractual consequences for a limited partner who commits capital and then fails to wire it by the deadline. Typical remedies, set out in the operating agreement or subscription agreement, include charging interest on the late amount, reducing or cancelling the LP's allocation, forfeiting a portion of their interest, reallocating the shortfall to other LPs, or pursuing the commitment as a debt. In practice sponsors rarely litigate over a single SPV cheque; the realistic remedy is cancelling the allocation and filling it from the waitlist. Keeping a waitlist is therefore worth the small effort. Clear, disclosed remedies also deter casual over-committing, which is the more common problem.