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Private Equity Fund Potentially Liable for Portfolio Company?ÇÖs Pension Plan Withdrawal Liability

The First Circuit Court of Appeals recently held that one of two private equity funds, which had invested in a now bankrupt portfolio company, was engaged in a ?Ç£trade or business?Ç¥ for purposes of determining whether the fund could be jointly and severally liable for the company?ÇÖs withdrawal liability from a multiemployer pension plan. ?áTo be liable for the company?ÇÖs withdrawal liability, the fund must be (i) a ?Ç£trade or business?Ç¥ and (ii) in the company?ÇÖs ?Ç£controlled group.?Ç¥ The court held that the fund was a trade or business, not a mere passive investor, because it participated in management activities with respect to the portfolio company and received a direct economic benefit ?Çô an offset against management fees ?Çô that an ordinary passive investor would not receive. ?áThe court, however, remanded the case to the district court to determine whether the fund had the necessary ownership interest to create a… Continue Reading

August 2013
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