(Reuters) – Carlyle Group LP emulated its peers on Wednesday with plans to convert from a publicly traded partnership into a corporation, and went one step further by announcing it will become the first U.S. private equity firm to hold shareholder votes.
The corporate governance changes will have limited impact on how the Washington, D.C.-based firm runs its affairs, given that it will continue to be controlled by its founders and employees for the foreseeable future. Insiders own 66% of Carlyle, and the vast majority of them have committed to voting their shares as a block for up to five years, the firm said.
Meetings - Shareholders - Votes - Milestone - Evolution
Nonetheless, holding annual meetings for shareholders to cast votes represents a significant milestone in the evolution of the secretive, tightly-knit private equity industry.
The move could end up boosting Carlyle’s valuation, because it will allow its inclusion in indices that exclude publicly traded partnerships. Carlyle may also be included in more indices than its peers, such as the Russell and the S&P, because it will be the first publicly traded private equity firm to abolish its dual-class shares.
Month - Blackstone - President - Jonathan - Gray
Earlier this month, Blackstone President Jonathan Gray said his firm does not plan to convert its dual-class share structure into one common class stock.
“We are going to stick with our governance strategy and work hopefully to convince these indices it makes sense to include us,” Gray told analysts on a conference call on July 18.
Equity - Firms - Taxes - Partnership - Structure
Private equity firms pay corporate taxes under the partnership structure on the management fees charged to investors, but are mostly shielded from paying these taxes on performance fees.
Under the so-called C-Corp structure, Carlyle will pay corporate taxes on all its revenue, in exchange for enabling investors such as mutual funds and index trackers to buy the stock.
Tax - Burden - Headline - US
The additional tax burden has become less severe after the headline U.S....
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