The Return of Capital template is designed to direct distributable cash flow to the Return of Capital bucket for one or more classes.
Pre-Conditions For Use:
The screenshot below shows the two required fields for input to utilize the template:
Classes: Select one or more classes that you want to direct the distributable cash flow. If you are selecting more than one, ensure they are equal in rights. If one class needs priority over another, set up two different rules (i.e. LP investors are paid back before GP Class members would require two rules).
Distribution Method: This will tell the system how to allocate the distribution amount between the investors in the event you are not distributing enough to return the total amount of capital in a distribution batch. Choose from:
- Pro-rata by Ownership: Most common choice. The amount distributed will be allocated according to each investor’s class ownership percentage,
- Pro-rata by Unpaid Preferred Return: Generally not appropriate for Return of Capital distribution allocation. Requires that a preferred return rate and rule be configured for all classes. The amount distributed will be allocated according to each investor’s percentage of the total amount of unpaid preferred return. For example, if you are distributing $50,000 but $100,000 of preferred return is accrued total to all investors and John Smith has accrued $1000 (1%), he will be paid 1% of the total distribution amount, or $500.
- Equal Distributions: Everyone receives the exact same amount (one-off)