Most-favoured-nation (MFN) clause

MFN clauses protect an early investor from being disadvantaged by later deals. They are often limited to investors of equal or smaller size, so that a large anchor investor's terms are not automatically extended to everyone.

For a manager, MFN clauses mean every side letter must be checked against existing ones before it is signed, which is why fund counsel and the administrator keep a side-letter register.

MFN terms, where agreed, sit in an investor's side letter with a POD fund and are applied by the administrator.