A capital call — also called a drawdown — is the formal notice a fund’s general partner sends to its limited partners requiring them to fund a portion of their capital commitment, on short notice and typically spread over the fund’s multi-year investment period, rather than all at once at closing.
The mechanics live in the fund’s own limited partnership agreement, not in a statute. CVCA publishes model fund documents for the Canadian market — limited partnership agreements and subscription agreements that are “Canadianized and annotated” versions of the Institutional Limited Partners Association’s templates — and it is that agreement, not corporate or securities law, that fixes the notice period, the size of each call and what counts as a default.
A commitment is typically raised as a single distribution of the LP’s fund interest under an NI 45-106 prospectus exemption at the time the investor subscribes; the calls that follow draw down against that already-committed amount under the LPA’s own terms, rather than each acting as a fresh distribution of securities. Where an LP misses a call, Canadian LPAs — including the ILPA-based models CVCA circulates — typically set out a defaulting-LP mechanism in the agreement itself: interest on the overdue amount, suspension of the LP’s distributions and consent rights, and, on a persistent default, a forced transfer or forfeiture of some or all of the LP’s interest on terms the LPA specifies.
A family office committed $4 million to a $180 million fund at its third close. Eighteen months into the investment period, the fund issues its fifth capital call, drawing 12% of all commitments to fund a $6 million add-on acquisition for an existing portfolio company plus the quarter’s management fee. The family office’s share is $480,000, due within the notice period its LPA specifies — funded from capital it already committed at closing, not a new investment decision it is being asked to make.
See also: Capital commitment · Carried interest · Cutting the turnaround time on quarterly LP reports.
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