Deal readiness in private equity is increasingly a documentation question as much as a commercial one. Regulation (EU) 2026/1386, the EU’s revised foreign direct investment screening framework, entered into force in July 2026, with a mandatory minimum scope of screenable transactions applying across Member States from January 2028. For PE managers, this means that ownership structure, source of capital and control arrangements will need to be evidenced clearly and quickly at the point a transaction is notified, not reconstructed after the fact. That evidentiary burden sits close to work depositaries already do.

AIFMD II represents a further development in depositary oversight within European private equity, reinforcing the depositary’s position within the fund’s governance and transactional framework. The Directive places greater emphasis on effective oversight and access to information, while amended Article 21 provides additional flexibility in the appointment of depositaries, including, subject to specified conditions and regulatory approval, the appointment of a depositary in another Member State where suitable domestic services are unavailable. Read alongside the new screening regime, the case for treating the depositary’s audit trail as a live, deal-ready resource, rather than a periodic compliance exercise, is stronger than before.

This is particularly evident in private equity, where portfolio assets typically comprise equity or debt interests in privately held companies. Unlike transferable securities held through conventional custody arrangements, ownership of these assets is generally established through shareholder registers, corporate records and transaction documentation. The depositary’s responsibilities consequently focus on ownership verification and asset record-keeping, alongside cash-flow monitoring and oversight of relevant fund activities. The same records that support the depositary’s own review are, in practice, the records a manager will need to hand when a screening authority asks for evidence of who ultimately controls a target. Having advised private equity managers through depositary onboarding and transaction reviews across a range of fund structures, we set out below what we have learned in practice about keeping that relationship from becoming a constraint on deal timetables, before turning to what portfolio companies themselves can do to stay ready.

Lessons from Our Own Engagements

Selecting and Onboarding a Depositary

Depositary selection extends beyond headline economics. Existing banking relationships offer commercial advantages and facilitate implementation, but the provider’s private-markets expertise and capacity to accommodate complex transaction structures are equally important. PE investments routinely involve acquisition SPVs, multi-tier holding structures, shareholder and intercompany financing, parallel vehicles and multiple jurisdictions. Familiarity with these structures materially improves the efficiency with which the depositary performs its ownership-verification and cash-monitoring functions.

This jurisdictional point has mattered in our own project experience. On engagements involving Asian portfolio assets, we have found that not all depositaries can provide sufficient custody or fund management services across all relevant Asian markets, given the specific local regulations that can apply. Where a manager anticipates deals in these markets, even prospectively rather than in the current portfolio, we recommend specifying this explicitly in the RFP, rather than assuming a shortlisted provider’s general capability extends to every relevant jurisdiction. A gap identified mid-transaction is a considerably harder problem to resolve than one screened out at the outset.

Once RFP responses have narrowed the field, close attention should also be paid to how shortlisted providers approach the pitch itself. We ask specifically about the operational model behind the offering, and in particular whether the fund will have a dedicated relationship partner rather than being routed through a general service desk. It is also worth noting how the provider frames the depositary service in its presentation: some position it as an additional service layered onto an existing banking relationship, rather than as a core offering in its own right. In our experience, that framing is a reasonably reliable indicator of how the service will be resourced and prioritised once onboarded.

Due diligence should accordingly cover the provider’s standard transaction-document requirements, review periods, technology capabilities and escalation procedures. These parameters are best established before appointment, rather than negotiated under the time constraints of a live transaction. It is also worth requesting draft legal agreements from shortlisted providers for review before onboarding, rather than treating this as a formality once a provider has effectively already been chosen. On one engagement, a draft agreement included conditions around pledges on assets that the fund was not prepared to accept; this only surfaced because the documentation was reviewed closely at the shortlisting stage, and it still resulted in roughly eight months of contract negotiation before terms were agreed. Early, substantive legal review should be treated as a standard part of the selection process rather than a step to be accelerated.

Scope and fee clarification also repays early attention. We have seen funds proceed to onboarding without both parties having documented, in equivalent terms, exactly which funds and vehicles sit within scope. This should be confirmed explicitly, along with whatever flexibility exists around future scope changes, such as new funds or new markets, with fee thresholds aligned to those possible changes at the outset rather than renegotiated each time the portfolio evolves.

Onboarding should establish a comprehensive baseline of the fund’s assets and legal structure. This is one of the more consistently underestimated parts of the process: on more than one onboarding, delays of around a month arose specifically because asset inventories, structure charts, PPMs and tax documentation were not assembled early enough, despite every depositary ultimately requiring substantially the same package. Starting this compilation well ahead of the target onboarding date, in parallel with provider selection where possible, is one of the more straightforward ways to avoid losing time later. TPRM (third-party risk management) checks and digital access provisioning should be initiated on the same timeline, since these can otherwise become an unexpected bottleneck to the actual transfer of documents. Where the fund’s operations are geographically dispersed, it is also worth drafting KPIs and SLAs with each local operations team before bringing them to the provider, rather than agreeing a single generic service standard and expecting it to translate evenly across markets. Completing this exercise at the outset provides a reliable reference point for subsequent activity and limits recurring information requests. Responsibility for the relationship should also be clearly allocated within the manager, typically to legal, finance or fund operations. Onboardings that have gone smoothly have tended to have this ownership clear from day one, rather than settled informally once the first transaction is already underway.

Integrating the Depositary into the Transaction Lifecycle

The depositary’s involvement is most pronounced in the period preceding closing. Depending on the transaction and provider, the transaction pack typically includes Investment Committee approval, acquisition structure charts, relevant SPA documentation, SPV incorporation documents, shareholder or intercompany loan agreements, financing information, sources and uses and draft funds-flow statements. These requests reflect the depositary’s underlying functions: corporate and transaction documentation supports ownership verification and oversight, while sources-and-uses and payment information enables cash-flow monitoring.

The scope of the transaction pack should be defined at onboarding, with a clear distinction between documentation necessary to discharge regulatory responsibilities and supplementary information required under the provider’s internal policies. This is particularly relevant to commercially sensitive agreements; where only specific provisions are relevant, agreeing the use of extracts or appropriately redacted documentation preserves confidentiality while avoiding unnecessary delays. Left undefined, this point tends to resurface deal by deal, with the manager and depositary effectively renegotiating the same question each time a new transaction arises.

Review periods require the same degree of upfront consideration. Based on our experience across transactions, providers commonly seek approximately five business days to review a transaction pack, although two to three business days is achievable where the fund structure is familiar and documentation is complete. These are contractual service levels rather than statutory pre-clearance requirements under AIFMD, and should be negotiated accordingly. An accelerated review process and defined escalation route are equally important for transactions with compressed or changing timetables; the absence of a pre-agreed escalation route tends to become a source of friction precisely when a deal timetable moves, which is usually the point at which a manager can least afford it. The relationship continues after completion. Maintaining the asset inventory contemporaneously is preferable to periodic reconstruction ahead of audit or reporting deadlines, and materially reduces the reconciliation burden across the manager and its service providers. We have seen that burden fall disproportionately on fund operations teams when records are left to build up between reporting cycles rather than updated as changes occur.

Broader Considerations

The appointment should also be considered within the manager’s wider service-provider architecture. As assets under management and portfolio complexity increase, periodic benchmarking of fees and service standards identifies opportunities to improve both economics and execution. Where the administrator and depositary are separate providers, consistency of underlying asset and ownership data is essential; a common information baseline reduces duplicated requests and discrepancies between provider records. Technology and operational resilience should similarly form part of provider assessment, since the quality of document-management systems and data controls directly affects the reliability of the relationship.

Practical Tips for Portfolio Companies

Much of the above sits with the manager and depositary. But portfolio companies hold a good share of the underlying records that both parties, and increasingly a screening authority, will ask for. Based on what we have seen work well, portfolio companies looking to keep their own custody and ownership records deal ready should consider the following:

1. Keep a live shareholder register and ownership chart, rather than one that is reconstructed only when requested. Ownership changes, whether through follow-on investment, restructuring or partial disposal, should be reflected as they happen.
2. Hold a standing document pack covering constitutional documents, cap table history, material contracts and financing agreements, so it can be shared on short notice rather than assembled from scratch under time pressure.
3. Assign a named internal owner, typically within finance or legal, responsible for keeping records current and for supplying them promptly when the manager requests them, whether for the depositary’s transaction pack or, where relevant, a screening authority filing.
4. Flag jurisdictional or ownership complexity early. Where investor composition, control arrangements or ultimate beneficial ownership could bring a transaction into scope for FDI screening in a given Member State, raise this with the manager well before a transaction is announced rather than at the point of filing.
5. Reconcile records with the fund administrator and depositary on a regular cycle, rather than only at reporting deadlines, so no gap opens up between what the portfolio company holds and what the manager’s service providers rely on.

None of this removes the manager’s or depositary’s responsibilities. But a portfolio company that treats its own records as a live resource, rather than something to be pulled together when asked, is consistently the one that keeps a transaction on schedule when documentation is requested at short notice.

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Related reading

The portfolio company tips this article closes with, keeping a live shareholder register, maintaining a standing document pack, and flagging ownership complexity early, become considerably more urgent when a portfolio company is approaching disposal. At that point, the records the depositary and any FDI screening authority will ask for overlap significantly with the contract and ownership documentation that a divestiture process requires. Our article on how to manage contract separation in a divestiture or carve-out sets out what that process involves in practice: identifying and prioritising contracts by risk and spend, managing TSA timelines, engaging suppliers through the transition, and ensuring that the separation delivers service continuity rather than simply legal compliance.

How we can help

The onboarding, transaction integration, and record-keeping disciplines this article describes are most tested when a fund is executing a transaction under time pressure, whether an acquisition that brings new entities and contracts into scope or a disposal where ownership documentation needs to be evidenced quickly and cleanly. Our Post-Merger Integration and Carve-Out Support service supports PE managers and their portfolio companies through exactly those moments: auditing the contract and supplier estate, managing the separation or integration of agreements across entities, supporting TSA negotiations, and ensuring the commercial and operational outcomes reflect the deal rationale rather than being left to chance in the post-close period. If you are preparing for a transaction and want to understand how we can support the procurement and contract side of it, we are happy to have that conversation.

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References

Directive (EU) 2024/927 of the European Parliament and of the Council of 13 March 2024 amending Directives 2011/61/EU and 2009/65/EC as regards delegation arrangements, liquidity risk management, supervisory reporting, the provision of depositary and custody services and loan origination by alternative investment funds (“AIFMD II”), Official Journal of the European Union. Entered into force 15 April 2024; Member States are required to transpose it into national law by 16 April 2026. Full text: eur-lex.europa.eu/eli/dir/2024/927

Article 21 of Directive 2011/61/EU (AIFMD), as amended by AIFMD II, governs the appointment, eligibility and functions of the depositary. AIFMD II inserts new provisions permitting the appointment of a depositary established in another Member State, subject to national competent authority approval following a case-by-case assessment of the lack of relevant depositary services in the AIF’s home Member State. See Directive (EU) 2024/927, cited above, and commentary at Dechert LLP, “AIFMD 2.0: What’s New? Analysis of Key Changes” (March 2024).

For further detail on the conditions attaching to cross-border depositary appointments, including the EUR 50 billion national depositary market threshold and ESMA notification requirement, see Walkers, “AIFMD part 4: Impact on depositary and third country rules” (January 2025), and CMS Luxembourg, “Final text of political agreement on AIFMD II has been published”.

Regulation (EU) 2026/1386 of the European Parliament and of the Council of 17 June 2026 on the screening of foreign investments in the Union and repealing Regulation (EU) 2019/452, Official Journal of the European Union, published 26 June 2026. Full text: eur-lex.europa.eu/eli/reg/2026/1386/oj. See also Macfarlanes, “The new EU FDI Screening Regulation: (un)welcome changes for dealmakers”.

Note: The five-business-day and two-to-three-business-day transaction pack review benchmarks referenced above reflect typical contractual service levels observed across our own client engagements, rather than a published regulatory or industry standard, and are cited here as market practice rather than a formal source.