No-Fault Divorce Clause

A No-Fault Divorce Clause is a provision in the Limited Partnership Agreement that allows a supermajority of LPs (typically 66.7-80%) to suspend or terminate the GP's investment period, and in some cases remove the GP entirely, without needing to prove cause such as fraud, breach of duty, or misconduct. Unlike a for-cause removal that requires evidence of wrongdoing, a no-fault divorce can be triggered simply because a sufficient majority of LPs have lost confidence in the GP's ability to generate returns. When triggered, the most common consequence is suspension of the investment period—the GP can no longer make new investments but continues to manage existing portfolio companies toward exit. Some no-fault provisions go further and allow full GP removal with appointment of a successor. No-fault divorce clauses have become more common as LPs seek stronger governance protections, though they remain contentious because GPs argue they create uncertainty and can be triggered prematurely by short-term performance fluctuations.