When is a partnership a syndicatioon? Does an cash investor who is also an equity partner require syndication or will a simple partnership agreement cover this arrangement. Getting alot of opinions on both sides of the equation. Anyone care to commnet? Seems to me that most partnerships here in BP nation are not structured as syndicates. But legal advise seems to say that they should be????
I've done both debt and equity syndications. I don't think there is an official definition of what is a syndicate vs. a club, but I think most people think of a syndicate as a pool that consists of 3 or more investors.
Since the question is in regards to equity deal, most partnership agreements can simply list the investors on an annex. The areas of contention are in regards to major decisions, and typically these are governed by % ownership. In a syndicate where there are one or two large (i.e. 25% or greater) investors and a pool of small individuals, the individuals are typically pooled into their own LLC/LP with one representative providing the vote for all. A typical real estate crowdfunding deal is done in this manner. That LLC may have its own governing document, but that's really outside of the concern of the other partners.
If some of the investors are passive you should have an offering circular and something like an operating agreement. Is this always done? No. Should it be done if ANY (including 1) of the investors are passive. Generally yes....unless there are other exemptions that apply.
For small deals a formal syndication is rarely done. If you're the promoter in one of these deals make sure you give your investors control or you're asking for trouble if things don't go as planned.