The exact response and penalties by a fund to a limited partner that does not fund a capital call is governed by the Limited Partner Agreement (LPA). Most LPAs have very strict penalties for when a limited partner misses a capital call. However, there are many reasons that a limited partner may miss a capital call, including reasons outside of their control, such as bank delays. The Cornerstone LPA provides general partners with wide discretion on how to handle missed capital calls, including penalties, forfeiture, or leniency. The exact language from the Cornerstone LPA is below for reference:
2.3 Default. If a Limited Partner fails to make all or any portion of any Capital Contribution or any other amount required to be paid by such Limited Partner pursuant to this Agreement or applicable law, and such failure is not cured after a period of ten (10) Business Days after the delivery of General Partner’s written notice regarding such failure, then, unless waived by General Partner in its sole discretion, the defaulting Limited Partner will owe interest with respect to such unpaid amount calculated at a rate equal to 12% per annum unless waived in whole or part by General Partner in its sole discretion, and General Partner shall have the right to take one or more of the following actions in its sole discretion: (a) if the Limited Partner has not made any Capital Contributions, deem the Limited Partner’s Interest in the Fund to be forfeited; (b) if the Limited Partner has made a Capital Contribution, General Partner may sell the defaulting Limited Partner’s Interest for a purchase price equal to 50% of the lesser of (i) the defaulting Limited Partner’s aggregate Capital Contributions, or (ii) the Fair Value of the defaulting Limited Partner’s Interest at the time of default; (c) use any distributions that might otherwise be made to such defaulting Limited Partner to offset any amounts owed by the defaulting Limited Partner; or (d) pursue and enforce all rights and remedies it may have against the defaulting Limited Partner. Each Limited Partner hereby consents to the remedies provided for in this section.
2.3 Default. If a Limited Partner fails to make all or any portion of any Capital Contribution or any other amount required to be paid by such Limited Partner pursuant to this Agreement or applicable law, and such failure is not cured after a period of ten (10) Business Days after the delivery of General Partner’s written notice regarding such failure, then, unless waived by General Partner in its sole discretion, the defaulting Limited Partner will owe interest with respect to such unpaid amount calculated at a rate equal to 12% per annum unless waived in whole or part by General Partner in its sole discretion, and General Partner shall have the right to take one or more of the following actions in its sole discretion: (a) if the Limited Partner has not made any Capital Contributions, deem the Limited Partner’s Interest in the Fund to be forfeited; (b) if the Limited Partner has made a Capital Contribution, General Partner may sell the defaulting Limited Partner’s Interest for a purchase price equal to 50% of the lesser of (i) the defaulting Limited Partner’s aggregate Capital Contributions, or (ii) the Fair Value of the defaulting Limited Partner’s Interest at the time of default; (c) use any distributions that might otherwise be made to such defaulting Limited Partner to offset any amounts owed by the defaulting Limited Partner; or (d) pursue and enforce all rights and remedies it may have against the defaulting Limited Partner. Each Limited Partner hereby consents to the remedies provided for in this section.