Securing Development Opportunity Via Joint Venture Structuring

Wilson Browne advised a client on the creation of a property development joint venture involving the incorporation of a new company to acquire and develop a property asset.

The transaction involved establishing the joint venture structure, drafting a bespoke Shareholders’ Agreement and Articles of Association, and formalising a secured loan from the majority shareholder to fund the acquisition of the property.

The advice was led by Holly Threlfall, with a focus on ensuring the funding arrangements were clearly documented and protected from the outset.

While the parties entered the venture with a shared vision to develop and realise value from the property, the project did not progress as anticipated.

Subsequent planning complications created significant delays and prevented the development from moving forward within the expected timeframe. Despite ongoing discussions and efforts by the shareholders to explore alternative solutions, none were capable of delivering the immediate return required to repay debt and generate the anticipated profit.

As a result, the future of both the development and the joint venture became uncertain.

From the outset, careful consideration was given to how the acquisition would be funded and documented.

Rather than simply injecting funds into the company as equity, a secured loan arrangement was established and properly documented alongside the wider corporate structure. Comprehensive legal documentation, including a Shareholders’ Agreement and bespoke Articles of Association, provided clarity around the parties’ respective rights and obligations.

Years later, when the development encountered difficulties, these arrangements became invaluable.

As the company remained indebted to the majority shareholder under the secured loan, our client was in a strong position to enforce their rights and negotiate a transfer of the remaining shareholding. The clarity of the original funding structure avoided uncertainty and significantly strengthened the client’s negotiating position.

The protections built into the original transaction ultimately delivered substantial value for the client.

The secured loan structure enabled the client to negotiate ownership of 100% of the company and, indirectly, full control of the property asset. This allowed them to take the development forward independently and benefit as the original and principal funder of the project.

Had the funding been introduced solely as share capital, or had the arrangements not been properly documented, the outcome could have been very different. The client may have faced lengthy negotiations, uncertainty over entitlement, and the potential loss of a significant investment.

Instead, the foresight of putting the correct structure and documentation in place at the beginning of the venture provided a clear route to a successful resolution when circumstances changed.

1. Be Clear About How Funds Are Introduced. Ambiguity creates risk. Whether money is being provided as share capital, a director’s loan or a secured loan can have a significant impact on the rights and protections available if things do not go according to plan.
2. Put Robust Documentation in Place. Shareholders’ Agreements, bespoke Articles of Association and properly documented funding arrangements act as an important safeguard. They provide certainty, define expectations and can strengthen your position if disputes or difficulties arise.
3. Plan for the Unexpected. Even the most carefully considered development projects can encounter unforeseen challenges. While no legal document can prevent problems from occurring, the right legal structure can help manage risk and protect your investment when circumstances change.
4. Consider Exit and Deadlock Scenarios Early. Joint ventures work best when everyone is aligned, but it is equally important to consider what happens if objectives diverge or the project stalls. Addressing these issues at the outset can help avoid costly disputes later.
5. Seek Advice Before the Deal is Done. The decisions made at the start of a project can have long-term consequences. Taking specialist legal advice before funds are invested can make the difference between a protected investment and an expensive dispute years down the line.