Generic pass through contract structure

[btharper]

Looking for input from the community in general about the general structure and issues around setting up assets for different pass throughs available. Given the number of exchanges available I think these may become more common in the future.

The general contract should address any issues likely to come up and anything that might create a problem if the unlikely were to happen, including but not limited to:

• What happens with funds from sold shares
• What happens with proceeds from the pass through
• The cut (or lack thereof) taken by the issuer
• Suggested: Any other sources of profit derived from the asset (such as referrals)
• Specific steps if issuer wants to shut down the pass through
• What happens if the end point of the pass through shuts down cleanly
• What happens if the end point of the pass through shuts down uncleanly (partial refund, disorganized information)
• What happens if the end point of the pass through runs off with everything (gone tomorrow)
• What happens if the exchange the asset is listed on shuts down cleanly/uncleanly
• Conditions specific to the exchange, such as additional trade fee available on some exchanges
• How motions on the underlying investment are handled. (Credit: odolvlobo)
• Protection of the asset from outside issues of the issuer including bankruptcy (Credit: HorseRider)

Can anyone else think of anything that should be addressed in addition to the above? or clarified? Or just other things to be mindful of?

Can anyone offer input on what about a pass through would make it more or less likely to be listed?

[odolvlobo]

How expenses are paid.
How the operator of the pass-through is paid.
How voting on motions is handled.
How dividends are passed through.
How the NAV is calculated.
How assets can be added to or removed from the fund.

[HorseRider]

Bankrupt remoteness: what if the issuer of the pass-through bankrupted and the creditors claim that they have the right to obtain the underlying asset.

[btharper]

How expenses are paid.
How the operator of the pass-through is paid.

I imagine this is all covered by handling in and out explicitly (What is done with funds from sold shares, and what happens with proceeds from the pass through). I imagine this should cover all money going through the operator for the pass through. Is there anything I'm missing on that?

How voting on motions is handled.

Good point, I imagine most would have holders vote and pass along majority decision, or with as much granularity as possible.

How dividends are passed through.

See first quote about money in and out.

How the NAV is calculated.
How assets can be added to or removed from the fund.

For a single venture pass through (ie to a single other business or asset on another exchange) I don't think either of these should be an issue. Things do get a lot more complicated for ETFs or funds of course.

Bankrupt remoteness: what if the issuer of the pass-through bankrupted and the creditors claim that they have the right to obtain the underlying asset.

Good point, any idea how to phrase the legalese? Both for this case and general protection of the asset from outside problems of the issuer.