Spreadsheets in legal documents

I have spent a considerable part of today translating the equalisation clauses in our Limited Partnership Agreement into formulas in a spreadsheet. Equalisation payments are made when new investors join a Limited Partnership and they pass from new investors to old investors to compensate the old investors for the additional risk they took by investing first and/or to adjust for changes in the value of the fund’s investments in the period between when the old and new investors invested. They are dependent on a number of inter-related variables which makes them hard to calculate.

That was time I didn’t expect to spend on this task and time I didn’t have. And we still have to get all parties to understand and buy into our spreadsheet so it isn’t over yet.

I’ve been here before too, when implementing anti-dilution clauses after down-rounds.

It shouldn’t be necessary.

Rather than imperfectly describe formulas in legal documents we should be able to capture them precisely in a Google Sheet or Excel and append the file to the legal document. Then we would have definitive reference calculations that everybody could use saving time and eliminating scope for disagreement over interpretation.

I believe my former employer Operis have started doing this in the project finance arena, attaching complex models of entire projects to legal contracts which are referred to in clauses determining how payments change under different circumstances.

In time the Blockchain might be a better solution to this problem, but spreadsheets would work today without further development of software.

  • Jeff DiStanlo

    i have thought about doing this as well. a static copy of the spreadsheet in the exhibits is helpful and an improvement, but without the working calcs behind the numbers i found that you still need to use words to describe how the calcs work. distribute an excel copy with the legal docs and make sure it hasn’t been modified by taking a hash of the file and putting that into the legal doc? then you would know if you were always working with a correct version of the spreadsheet?