Interim clawback / true-up
Last updated
Quick Answer
An interim clawback tests and reconciles the general partner's carry entitlement during the fund's life rather than only at wind-up.1,2
What it is
It requires repayment of any excess identified at the test date, so an overpayment is corrected while the recipients are still present and the amounts are still recoverable. Limited partners generally push for interim testing; general partners generally resist it, because it converts a distant contingency into a live obligation.1,2
Operational context
What good looks like
Why It Matters
Testing during the fund's life corrects an overpayment while the recipients are still present and still solvent, which is why limited partners press for interim testing and general partners resist it.1
Term Family
Related concepts
Frequently Asked Questions
What is Interim clawback / true-up in venture capital?
It requires repayment of any excess identified at the test date, so an overpayment is corrected while the recipients are still present and the amounts are still recoverable.
Why is Interim clawback / true-up important for startups?
Understanding Interim clawback / true-up is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
Sources & References
- 1.ilpa-fund-terms-2021 — Industry Intelligence Report — "What's Market in Fund Terms?" (2021)Industry Intelligence Report — "What's Market in Fund Terms?" (2021)ILPA(An interim clawback tests and reconciles the general partner's carry entitlement during the fund's life rather than only at wind-up.)primary · T1 · vesting-clawback · structure
- 2.ilpa-principles-3 — ILPA Private Equity Principles 3.0 (2019)ILPA Private Equity Principles 3.0 (2019)ILPA(An interim clawback tests and reconciles the general partner's carry entitlement during the fund's life rather than only at wind-up.)primary · T1 · vesting-clawback · structure
- 3.ilpa-model-lpa-wof-ts — ILPA Model LPA Term Sheet — Whole-of-Fund Waterfall Version (July 2020)ILPA Model LPA Term Sheet — Whole-of-Fund Waterfall Version (July 2020)ILPA(An interim clawback tests and reconciles the general partner's carry entitlement during the fund's life rather than only at wind-up.)primary · T1 · vesting-clawback · structure
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