A significant portion of private funds rely on the exemptions from registration under either Section 3(c)(1) or Section 3(c)(7) (Registration Exemptions) of the Investment Company Act of 1940 (Investment Company Act). Section 3(c)(1) exempts issuers whose outstanding securities are beneficially owned by 100 or fewer persons (100 Person Limit). Alternatively, Section 3(c)(7) exempts issuers whose outstanding securities are owned exclusively by persons who, at the time of acquisition or transfer of such securities, are qualified purchasers (i.e., most partnerships, corporations and other legal entities with at least $25 million in investments) (Qualified Purchaser Requirement and, together with the 100 Person Limit, the Exemption Requirements).

To rely on a Registration Exemption, sponsors must include appropriate questionnaires in their funds’ subscription documents and transfer agreements to ensure compliance with applicable Exemption Requirements. Further, sponsors need to understand how the Exemption Requirements are affected, if at all, by certain look-through rules and integration requirements developed by the SEC. This article explores how sponsors can ensure their funds comply with Exemption Requirements after applying certain look-through rules and the integration doctrine, with a special focus on multi-entity fund complexes.

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