Key person clause is an LPA provision that stops or restricts the GP from making new investments when named partners exit or fail to meet time-commitment tests.

How it works

The LPA lists “key persons” — often founding partners. If one dies, is disabled, leaves the firm, or falls below a defined time commitment, the fund enters a key person period. During that window, the GP typically cannot deploy capital into new portfolio companies without LPAC or LP consent.

LPs may vote to waive the clause, replace key persons, or begin winding down the fund. Management fees sometimes continue at a reduced rate; existing portfolio support obligations remain.

Why it matters

• LPs: Read who is named and whether the clause is single-trigger or requires multiple departures. Succession plans matter as much as past track record.
• GPs: Key person events freeze fundraising narratives and new deal pace. Clear bench depth and LP communication reduce waiver friction.

Key person periods vary in length — 90 days to six months is common while LPs assess succession. During suspension, the GP may still manage existing assets, pay fees at reduced rates, and defend portfolio companies, but cannot open new positions without waiver.

Replacement key persons must usually meet experience thresholds defined in the LPA. Institutional LPs track key person history across firms when deciding re-ups.

Common mistake

Assuming the clause only applies on death. Many triggers include joining another firm, reduced time percentage, or regulatory disqualification.

Related ideas

• Limited Partnership Agreement (LPA)
• Key-person risk
• LPAC consent and fund continuation