27 ILPA Principles 3.0 LPAC Best Practices The private equity industry has made meaningful strides in instituting standardized approaches to Limited Partner Advisory Committees (LPACs), including their constitution, role in the partnership and meeting protocol. The LPAC plays a critical role in fund governance, by providing a sounding board for the GP, and serves as an important source of input on critical governance determinations, conflicts of interest in particular. Still, more can be done to ensure that the LPAC is optimally situated to fulfill its role. LPs and GPs should explicitly establish the duties of the LPAC through the LPA and mutually adopt a preferred meeting protocol upon establishment of the LPAC. Further, the process or rationale by which GPs select LPAC members should be affirmatively and clearly disclosed to all LPs in the fund. While individual LPs serving on the LPAC act in their own interests in good faith, the LPAC should seek to operate as a committee with its roles and responsibilities clearly outlined in the LPA. To this end, standards in the composition, meeting processes, participation requirements, mandates and procedures for Limited Partner Advisory Committees should be adopted across the industry to maximize the effectiveness of these bodies for the benefit of the partnership. These best practices include representational diversity reflecting the LP base at large and/or disclosures of LPAC meeting agendas and minutes; the appointment of a Committee chair; in camera meetings without the GP present; and in camera meetings between the LPAC and the auditor. Common objectives of every LPAC should include: facilitating the performance of the advisory board without undue burden to the GP, creating an open forum for discussion of matters of interest and concern to the partnership while preserving confidentiality and trust, and providing sufficient information to LPs so they can fulfill these responsibilities. LPACs: Guidance for GPs Mandate The mandate of the LPAC should be clearly disclosed and should generally include matters specific to eval- uating conflicts of interest as presented by the GP, and other matters that would require a change to or interpretation of certain provisions within the LPA, including: • Conflicts of interest such as cross-fund investments and GP investment in portfolio companies outside of the fund’s interest or that violates the stated exclusions policy; • Review of valuation methodologies and any changes thereto as reported by the GP to the partnership and auditors; • Matters related to key person time and attention, changes to the key person provision or departures of key staff; • Fund term extensions; • Matters concerning tests of investment strategy, geographic, allocation or concentration limitations; • Use of leverage; • Affiliated transactions; • Reviews of any material ESG incidents and/or risks to the fund’s portfolio; • LP defaults; reduction or expansions in fund size; performance considerations such as clawbacks or true-ups; • Reviews of the costs of operational advisors; • Discussions around fees and expenses. The GP should not be an LPAC member, actual or perceived. In cases where voting members of the LPAC have an interest in the GP, such as a minority ownership stake in the management company, the GP should disclose the existence of those relation- ships to the LPAC. FUND GOVERNANCE