Subscription monies, capital calls and SPV accounts

At a closing, the funds have to be in place at the same time as the documents are made effective. The documents are counsel’s responsibility. The funding position is a question of fact: whether each contributor’s amount has arrived, from the person who committed it, on conditions recorded in advance. An independent segregated account records what has been funded before the closing takes effect.

Titanium provides custody for private capital structures: subscription proceeds, capital call monies and accounts for special purpose vehicles. This note explains what each account is for and what the documents around it have to settle.

Why investor monies sit with an independent holder

A contributor funding a closing is asked to part with money before the thing it buys exists in final form. Holding that money with a regulated firm that is independent of the manager gives every participant the same position: the funds are segregated under client money arrangements, the conditions on which they move are documented before they arrive, and they move only on the mechanics those documents record. The arrangement also produces a record of what has been funded, prepared by a party independent of the manager.

How does a subscription account work at first closing?

Subscription monies are received against the subscription documentation and held until the documented closing conditions are met. The drafting question is the same one that governs every release condition: could a stranger holding only the documents decide whether the condition is met. A stated minimum aggregate commitment evidenced by a certificate in a defined form is a condition an agent can apply. “Once the first closing has occurred” is not, because it asks the agent to determine the very thing the account exists to evidence.

The reciprocal position matters as much as the closing itself. If the conditions are not met by the longstop date, each contributor’s amount has to be returned. The documents should say to whom each amount returns, on what evidence, and by when. The return leg should be documented at the outset, in terms the agent can apply.

How are capital calls handled?

A drawdown notice creates a short gap between the call and the deployment, and during that gap the called amounts sit somewhere. Holding them in a segregated account gives the manager a single reconciled position across the contributor base, and gives contributors the same assurance the subscription account gave them at closing: the money is with an independent holder, and it moves on the documented instruction, not before.

SPV and deal-by-deal structures

Deal-by-deal investing multiplies the problem, because each vehicle needs its own account, its own documented signatories and its own statements. Each SPV account is established under its own agreement, so the arrangements for one vehicle never blur into another and each vehicle’s position is recorded separately. Where the same sponsor runs several vehicles, one account per vehicle with its own instruction mechanics keeps the audit trail separate for each.

Where the closing does not complete

When the closing occurs, release follows the documented instruction: to the fund, to the target, to a distribution across several recipients where the structure requires it. When it does not, return follows the mechanics recorded at the start. In neither case does the agent decide which of the two has happened. It acts on the instruction or the specified evidence, which keeps the agent outside the question of whether the closing occurred.

Onboarding a contributor base

Every funding party is onboarded: identity, authority and source of funds, with enhanced due diligence applied on a risk-assessed basis. The number of contributors drives the onboarding timetable, for the same reason payee count drives a distribution: each contributor is a person or entity who has to respond. Onboarding can begin when the subscription documents go out, which shortens the period between the closing date being fixed and the funds being available.

What the account holder does not decide

Titanium expresses no view on the fund’s terms, the merits of any investment or the sufficiency of any commitment. It does not calculate allocations, determine whether a closing condition has been satisfied, or assess compliance with fund documentation. It holds the amounts and moves them in accordance with the account agreement and valid authorised instructions, or against documentary evidence expressly specified in that agreement, subject to applicable law and regulatory requirements.

Common questions

Can one account serve several vehicles?

One account per vehicle, with its own instruction mechanics, keeps the audit trail separate for each.

When can onboarding start?

Onboarding can begin when the subscription documents go out, rather than when the closing date is fixed.

Who confirms that a contributor has funded?

Titanium holds the funds and issues statements. It applies the instruction or the specified evidence and forms no view on whether the closing occurred.