A McDermott Will & Schulte program on managing portfolio company risks addressed two unique potential concerns for PE and venture capital (VC) sponsors. The first is due to the hands-on nature of PE investing, which introduces the potential for a plaintiff to pierce the corporate veil of a portfolio company to hold a PE sponsor responsible for its portfolio company’s liabilities. The second is the possibility that so-called “pay-to-play” clauses in VC transactions – which penalize existing preferred shareholders that refuse to participate in subsequent financings – may be voided under Delaware law. Together with Ben Magleby, GC and CCO at Level Equity, McDermott Will & Schulte partners Allison Scher Bernbach, William H. Gussman, Jr. and David K. Momborquette examined the risks associated with claims to pierce the corporate veil and invalidate pay-to-play clauses, as well as the ways sponsors can mitigate and manage those risks. This article distills their insights. See “How PE Sponsors Can Avoid Being Targeted by the DOJ for Parental Liability Under the False Claims Act” (Dec. 15, 2020).