---
title: "What Is No-Fault Divorce?"
term: "No-Fault Divorce"
description: "No-fault divorce in fund documents allows limited partners to remove or replace a general partner — or terminate the fund's investment period — without proving misconduct, usually via a supermajority LP vote."
date: 2026-07-25T00:00:00.000Z
updated: 2026-07-25T00:00:00.000Z
topics: ["fund-economics"]
source: https://venturecapitaltracker.com/glossary/no-fault-divorce
---

# What Is No-Fault Divorce?

> No-fault divorce in fund documents allows limited partners to remove or replace a general partner — or terminate the fund's investment period — without proving misconduct, usually via a supermajority LP vote.

**No-fault divorce** is a limited partner protection in the limited partnership agreement (LPA) that permits removing the general partner or ending active investing without requiring proof of wrongdoing.

### How it works

LPAs specify vote thresholds — often 75% or more of LP interests — to cause **GP removal**, **key person** replacement, or termination of the **investment period**. "No-fault" means LPs need not allege fraud or material breach; sustained underperformance, style drift, or loss of confidence can motivate the vote if politics align.

Upon trigger, a **successor GP** or administrative liquidator may manage existing assets while new investments stop. Economics for the removed GP — carry, management fees, and liability — depend on negotiated LPA language and side letters.

No-fault divorce differs from **for-cause** removal, which requires defined breaches. It also differs from voluntary fund wind-down when the strategy is complete.

### Why it matters

- **LPs:** It is a backstop when governance fails or teams scatter. Institutional LPs track whether divorce rights are standard in the vintage and use them sparingly because transitions are costly and disruptive.
- **GPs:** Strong reporting, LPAC engagement, and aligned strategy reduce tail risk. Divorce clauses influence how aggressively GPs pursue extensions or successor funds after a weak vintage.

### Common mistake

Assuming no-fault divorce instantly liquidates the portfolio. Most structures continue holding assets for years; the change is who decides exits and fees, not immediate cash return.

### Related ideas

See also [LPA](/glossary/lpa), [key person risk](/glossary/key-person-risk), LPAC, and investment period termination.

## FAQ

### What is No-Fault Divorce in simple terms?

It is an LP right to fire or replace the GP team without showing fraud or breach — typically if a high percentage of LPs vote for it. The fund may continue winding down investments under new management or a liquidator.

### Why does No-Fault Divorce matter?

For LPs, it is ultimate accountability when returns lag or strategy drifts. For GPs, it raises the bar on communication and alignment; triggering divorce is rare but reshapes negotiation power in extensions and successor funds.


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Source: https://venturecapitaltracker.com/glossary/no-fault-divorce