Secondaries and SPVs: transfer consent in a market built on PDFs
The secondaries market grew into a major share of private capital activity while its verification infrastructure stayed exactly where it was: incumbency certificates, board resolutions, signature pages, and a partner billing hours to read them.
How is authority verified in a secondaries transfer?
By a law firm reading PDFs. Transferring an LP interest requires GP consent plus a chain of authority documents across entities — board resolutions, incumbency certificates, powers of attorney — and every artefact in that chain is a document whose authenticity is assessed by inspection.
- Authority in private market transactions is evidenced by documents whose own authority cannot be verified without more documents.
- Each counterparty repeats the same verification, which is why legal cost scales with chain length rather than with transaction value.
- This is graded C: the mechanism is sound and the transaction data is private, so the business case must be built from a firm's own cost per transfer.
Part of Private capital and fund identity
The document chain
A transfer of a limited partnership interest requires, at minimum: the transfer agreement, the GP's consent, evidence that the person signing for the seller had authority, evidence that the person signing for the buyer had authority, and evidence that the person signing the GP consent had authority.
Each of those last three is typically an incumbency certificate — a document in which a company secretary certifies who holds which office and is authorised to sign. Its own authority rests on the secretary's authority, evidenced by another document.
The chain terminates when a lawyer decides it has gone far enough, which is a judgement rather than a verification.
Why cost scales badly
| Party | What they verify | Who else verifies the same thing |
|---|---|---|
| Buyer's counsel | Seller authority, GP consent authority | Everyone |
| Seller's counsel | Buyer authority, GP consent authority | Everyone |
| GP's counsel | Both parties' authority | Everyone |
| Fund administrator | Consent validity | Everyone |
| Financing bank, where present | All of the above | Everyone |
Five parties independently reading the same documents. Nobody can rely on another's work because there is no artefact conveying that it was done.
The Authority Artifact
Replace the incumbency certificate with a signed delegation that any counterparty can verify without reading anything.
{
"type": "manav-stmt/1",
"action": "entity_signing_authority",
"entity": "[legal name, registration number, jurisdiction]",
"authorised": "[individual name, office held]",
"scope": "[transaction classes]",
"limits": "[value ceiling, where applicable]",
"valid": "[from]–[to]",
"issued_by": "[company secretary or board, credential]"
}A consent signed under a verifiable authority artefact answers the authority question mechanically. The five parties verify a signature rather than reading a chain, and the verification is identical for all of them.
Why this has not happened
Not for technical reasons. Three commercial ones, stated plainly:
- Legal opinion practice is entrenched, and the parties who would build the artefact are the parties currently billing for reading the documents.
- Private market transactions are bespoke by preference, and standardisation is resisted on the grounds that every deal is different — which is true of the economics and false of the authority questions.
- The cost is real but diffuse, absorbed as legal fees rather than appearing as a line item anyone owns.
How a firm would test it
The evidence base for this is closed — nobody publishes legal cost per transfer or time-to-close attributable to authority verification. So the business case has to be built internally.
- Take the last twenty transfers. Extract the legal hours attributable to authority and incumbency verification, separately from commercial negotiation.
- Count how many parties verified the same authority documents.
- Estimate the time-to-close contribution. In a competitive process, days matter commercially.
- Run one transaction with authority artefacts from a cooperative counterparty and compare.
If the attributable hours are small, the proposal fails and should be dropped. That is a real possibility and this record is graded C partly because of it.
Where it would start
Continuation vehicles and GP-led secondaries, where the same GP is on both sides and the authority chain repeats across many LP interests in a single transaction. The repetition is what makes the artefact pay, and a single GP can adopt unilaterally.
Why this is expensive as well as risky
The diligence cost is the visible problem: counsel assembling and reading an authority chain across several entities and jurisdictions, repeated for every transfer. The risk is the quieter one — a forged consent or a stale incumbency certificate reads exactly like a valid one.
| Artefact | Establishes | Testable? |
|---|---|---|
| GP consent letter | The GP permitted the transfer | No |
| Board or member resolution | The entity authorised the act | No |
| Incumbency certificate | This person holds that office | No — and it goes stale |
| Power of attorney | Authority to sign on behalf | No |
Objections and honest limits
“Counsel catches problems.” Counsel catches inconsistencies. A clean forgery is internally consistent, which is the point of making one.
“Secondaries volume does not justify the change.” The volume is rising and the per-transaction diligence cost is what makes small transfers uneconomic. Verifiability lowers the cost before it lowers the risk.
Making an authority chain verifiable
- Sign the consent, not the covering letter. Parties, interest, conditions, effective date.
- Issue incumbency as a short-lived signed statement. Staleness bounded by construction.
- Reference each link from the next. So the chain is machine-followable, not manually assembled.
- Publish entity keys. So a counterparty verifies without contacting counsel.
Terms used here
- Secondary transfer
- A sale of an existing LP interest from one investor to another, requiring GP consent.
- Incumbency certificate
- A statement that a named person holds a stated office with stated authority. Accurate when issued, and silently stale afterwards.
- SPV
- A special purpose vehicle holding an interest, which adds a layer to the authority chain.
Frequently asked questions
Does this replace legal opinions? No. Opinions address enforceability and a range of questions beyond authority. This addresses one mechanical question that currently consumes disproportionate time.
Who issues the authority artefact? The company secretary or an authorised officer, under the same governance that produces an incumbency certificate today.
Why is this graded C? Because the cost data is private and the adoption barrier is commercial rather than technical. The mechanism transfers cleanly from other domains; the business case has to be built firm by firm.
Would a GP adopt this unilaterally? In a continuation vehicle with many transferring LPs, yes — the repetition within one transaction is enough to justify it without any counterparty agreement.
What does counsel actually verify? Internal consistency of the documents. A clean forgery is internally consistent, which is what makes it a forgery worth producing.
Why is the incumbency certificate the weak link? It is true when issued and goes stale silently. Nothing in the document tells a reader whether the person still holds the office.
What is the commercial argument? Per-transaction diligence cost is what makes small transfers uneconomic. Verifiability reduces cost before it reduces risk.
Where this fits in Manav
Manav binds the authorising individual to the exact instruction being given — the amount, the destination and the entity — and produces a receipt an administrator, a custodian or an LP can verify without calling the issuer.