What is a key person clause?

The clause sits in the LPA and usually names two to four senior people, with a trigger tied either to departure or to a minimum share of working time. A suspension often starts automatically and lasts a set period, such as 180 days, while the GP proposes replacements for investor approval. It is separate from no-fault removal, which does not depend on any departure.

Say a fund names two founders as key people and one retires. It may have to stop new investments until investors, often by a 75% vote, agree to carry on.

It ties a fund’s life to the few people investors are really backing.