Legal considerations for infrastructure funds span fund formation, complex transaction execution, regulatory compliance across multiple jurisdictions, and ongoing governance over fund lives that may extend two decades or longer. The structural complexity typical of infrastructure investments—involving holding companies, project entities, and co-investment vehicles—combined with sector-specific regulatory requirements creates legal workstreams that exceed most other private fund strategies. Building appropriate legal infrastructure from formation supports effective operations throughout the extended fund lifecycle.
Fund Formation Structure
Infrastructure fund structures typically involve multiple entities serving distinct functions. Common elements include:
- Fund Entity: Usually a Delaware limited partnership that serves as the primary investment vehicle. The fund pools LP capital and makes investments, either directly or through intermediate holding structures.
- General Partner: A separate entity, typically an LLC, that manages fund affairs and bears unlimited liability. GP structure may involve multiple layers depending on sponsor organization.
- Management Company: The entity employing investment professionals and receiving management fees. May be the same as or separate from the GP depending on structure.
- Parallel Vehicles: Infrastructure funds often include parallel structures to accommodate different investor types—feeder funds for non-U.S. investors, blocker corporations for tax-exempt investors, or separate vehicles for regulatory reasons.
- Co-Investment Vehicles: Given the size of infrastructure transactions, co-investment structures allowing LPs or third parties to invest alongside the main fund are common and require their own documentation.
Delaware remains the dominant formation jurisdiction for U.S. infrastructure funds, though Luxembourg, Cayman Islands, or other jurisdictions may be used for international structures or to accommodate specific investor requirements.
Core Fund Documents
Fund documentation establishes the legal framework governing fund operations and investor relationships over the extended fund life.
The Limited Partnership Agreement addresses:
- Investment strategy, restrictions, and concentration limits
- Fund economics—management fees, carried interest, hurdle rates, and waterfalls
- Capital call and distribution mechanics
- GP authority and investor consent requirements
- Conflict of interest policies and resolution procedures
- Term, extensions, and wind-down provisions
- Advisory committee composition and authority
- Co-investment policies and allocation
Infrastructure fund LPAs often include provisions addressing the extended fund life, including mechanisms for GP succession, fee adjustments during harvest periods, and LP liquidity options that may not be present in shorter-duration strategies.
The Private Placement Memorandum provides comprehensive fund information required for securities law compliance, including strategy description, risk factors, tax considerations, and regulatory matters. Infrastructure PPMs typically include detailed discussion of sector-specific risks and regulatory frameworks.
Transaction Documentation
Infrastructure acquisitions generate substantial documentation reflecting transaction complexity and the involvement of project finance lenders.
- Purchase Agreements: Asset or equity purchase agreements for infrastructure acquisitions often include extensive representations regarding permits, contracts, environmental matters, and regulatory compliance specific to the asset type.
- Project Finance Documents: Asset-level debt facilities involve credit agreements, security documents, intercreditor arrangements, and direct agreements that govern relationships among equity sponsors, lenders, and counterparties.
- Concession and Offtake Agreements: Long-term contracts with governmental entities or offtakers form the revenue foundation for many infrastructure assets. Legal review of existing agreements and negotiation of new contracts requires specialized expertise.
- Construction Contracts: Development-stage investments involve EPC contracts, equipment supply agreements, and construction management arrangements with complex risk allocation provisions.
- Operating Agreements: Asset management and O&M arrangements establish responsibilities for ongoing asset operations.
Regulatory and Permitting
Infrastructure investments frequently involve regulatory approvals and ongoing compliance obligations that require legal attention.
- CFIUS Review: Foreign investment in U.S. infrastructure often triggers CFIUS review requirements. Legal counsel guides filing decisions, process management, and any mitigation negotiations.
- Sector Regulators: Energy, telecommunications, transportation, and utility assets face sector-specific regulatory frameworks. Understanding regulatory requirements and maintaining compliance requires ongoing legal support.
- Environmental Permits: Infrastructure assets typically operate under environmental permits requiring compliance monitoring and potentially modification as operations change.
- Change of Control Provisions: Contracts, permits, and regulatory approvals may include change of control provisions triggered by fund acquisitions. Identifying and addressing these provisions forms part of transaction execution.
Cross-Border Considerations
International infrastructure investments create multi-jurisdictional legal requirements. Foreign investment restrictions, local ownership requirements, and jurisdiction-specific regulatory frameworks must be navigated. Tax treaty access and substance requirements influence structure design. Local counsel relationships in investment jurisdictions provide essential support for cross-border transactions.
Ongoing Legal Requirements
Fund operations generate continuing legal needs throughout the extended fund life:
- Side letter compliance tracking across the investor base
- Partnership agreement amendments as circumstances evolve
- Regulatory filings and compliance monitoring
- Portfolio company governance and board representation
- Asset-level contract management and dispute resolution
- Wind-down and liquidation planning as funds mature
Selecting Legal Counsel
Infrastructure funds typically engage law firms with specialized fund formation and infrastructure transaction practices. Relevant experience includes:
- Formation of infrastructure-focused funds
- Project finance and infrastructure M&A transactions
- Sector-specific regulatory expertise
- Cross-border transaction capability
- Long-term relationship capacity given extended fund lives
Many infrastructure managers maintain relationships with multiple firms—fund counsel for formation and investor matters, transaction counsel for deals, and sector specialists for regulatory issues.
Questions to Address with Legal Counsel
- What fund structure best accommodates the anticipated investor base and investment strategy?
- How should LPA provisions address the extended fund life and potential GP transitions?
- What CFIUS considerations apply to anticipated investments?
- How will sector-specific regulatory requirements be identified and addressed?
- What local counsel relationships support cross-border investment activity?
- How are legal costs managed over the extended fund lifecycle?
Legal infrastructure established during fund formation shapes operations throughout a fund life that may span two decades. Investing appropriate attention in legal matters from the outset—fund structure, documentation, and counsel relationships—supports effective operations and helps avoid problems that can be costly and disruptive to address later in the fund lifecycle.