USA Law and Practice Contributed by: Vijay Sekhon, Brien Wassner, John Godfrey and Justin Macke, Sidley Austin LLP
Fund Governance and US Securities Exchange Commission (SEC) Oversight The SEC’s new Private Fund Adviser Rules, adopted in 2023 and phasing in during 2025, were scheduled to reshape private fund operations. Key requirements included quarterly fee and performance statements to LPs, mandatory fund-level audits, and specific fair - ness standards for GP-led secondary transactions. However, the Fifth Circuit vacated these rules in 2024. Delaware Law and Shareholder Rights In response to a 2023 Chancery Court ruling that raised questions around investor veto rights, Delaware amended its General Corporation Law to clarify that shareholder agreements reserving consent rights are enforceable, provided they do not conflict with the company’s charter or non-waivable provisions. This legislative fix reaffirmed the validity of standard PE governance protections. Separately, Delaware courts have clarified legal pro - tections in conflicted take-private transactions. Under the MFW doctrine, established by the Delaware Supreme Court in Kahn v M&F Worldwide Corp , all members of the special committee must be independ - ent, and the procedural integrity of the required vote of disinterested shareholders must be upheld from the outset to benefit from business judgment deference. Sponsors are responding by formalising committee process and strengthening disclosure protocols when seeking such vote. Corporate Transparency Act (CTA) The CTA, effective 1 January 2024, mandated ben - eficial ownership reporting to FinCEN for most US entities, including portfolio companies and SPVs. Individuals with substantial control or 25% ownership must be disclosed. While LPs were generally excluded unless they meet control thresholds, the rule captured many GP and management entities, but enforcement has been suspended for US citizens and companies. 3. Regulatory Framework 3.1 Primary Regulators and Regulatory Issues Private equity transactions in the US are subject to oversight by multiple agencies. While core legal
frameworks have remained stable, agency enforce - ment priorities have evolved, particularly across anti - trust, national security and fund governance. Antitrust – FTC and DOJ The FTC and DOJ are the principal US antitrust regula - tors for M&A transactions and have taken an increas - ingly aggressive approach towards private equity and technology M&A activity. Both agencies have actively challenged deals involving consolidation in fragment - ed markets, especially in healthcare, technology and consumer services. Recent enforcement actions have targeted not only traditional mergers but also platform acquisitions and common ownership arrangements across competing portfolio companies. The agencies are scrutinising whether private equity sponsors are creating durable market power through cumulative deal activity. In practice, this has led to more sec - ond requests, longer timelines, and a growing need for early-stage co-ordination with antitrust counsel. Sponsors are conducting internal mapping of sector exposure, engaging economists, and preparing for potential divestiture discussions earlier in the pro - cess and spending more time preparing the additional information now required in antitrust filings. The Trump administration has indicated that it intends to scruti - nise large technology transactions among others. Foreign Investment – CFIUS CFIUS reviews M&A transactions that may result in foreign control of a US business, with particular atten - tion to sensitive sectors such as critical infrastructure, defence and personal data. For private equity spon - sors, even minority stakes or indirect exposure to for - eign LPs or co-investors (including sovereign wealth funds) can trigger review where governance rights or access to information are implicated. CFIUS-specific closing conditions are now common in cross-border private equity transactions, and time - lines must account for both voluntary filings and the possibility of extended investigation periods. While most filings are resolved without penalty, failing to submit a reviewable transaction or withholding infor - mation can result in significant enforcement action. In parallel, a potential outbound investment regime may impose further restrictions on sponsor activity in sensitive technologies.
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