Property Development Joint Venture Disputes Solicitors

Property developments are often acquired and operated through special purpose vehicles (SPVs), companies established specifically to own a site, raise finance and carry out a particular project. This can provide a clear investment structure, but it also means that a shareholder or director dispute can become a dispute about control of the development itself.

At The Jonathan Lea Network, we advise shareholders, directors, developers, investors, landowners and property companies on disputes involving development SPVs. We combine commercial dispute resolution with JLN’s corporate and property expertise so that the company law issues are considered alongside funding, land ownership, construction and the wider development timetable.

Where substantial investment or an important project decision is at stake, early legal advice can be particularly valuable. Once shares are issued, land is transferred or project funds are moved, reversing the position may be more difficult.

Why SPV Disputes Can Put the Development at Risk

A development SPV may own the land, employ the project team, borrow development finance, enter into construction contracts and receive sale proceeds. Its decisions can therefore determine whether a project can continue.

If shareholders or directors cannot agree, the company may be unable to approve further borrowing, enter into contracts, sell units or respond to a funding shortfall. Where one side controls the board or voting rights, the dispute may instead concern whether that control is being exercised properly.

We focus first on identifying the practical risk to the project and the client’s position, then consider the legal remedies available.

Common Property SPV Shareholder and Director Disputes

We advise on matters including:

– shareholder deadlock and disputed reserved matters;

– unfair prejudice claims;

– breaches of shareholders’ agreements;

– director misconduct and breaches of directors’ duties;

– conflicts of interest and diversion of development opportunities;

– disputed shareholder funding and loans;

– share issues and dilution;

– appointment and removal of directors;

– ownership, voting and management control;

– access to information and company records; and

– shareholder exits, compulsory transfers and valuation disputes.

The correct route depends on whether the harm is suffered by the shareholder personally, by the company, or both.

Shareholder Deadlock and Control

Development SPVs are frequently owned by two investors or a small number of participants. Where voting is evenly split or key decisions require unanimous approval, disagreement can leave the company unable to act.

Deadlock may affect budgets, additional finance, contractor appointments, sales, refinancing, planning strategy or the decision to inject further capital. The shareholders’ agreement and articles may contain escalation, buy-sell or transfer procedures designed to resolve the position.

We can advise whether the relevant deadlock provisions have been triggered and whether proposed steps comply with the agreed governance arrangements. Where the documents do not offer a workable solution, negotiation, mediation or an agreed buyout may need to be considered.

Unfair Prejudice Claims

Section 994 of the Companies Act 2006 allows a member of a company to petition the court where the company’s affairs are being conducted in a manner that is unfairly prejudicial to members’ interests.

In a property SPV, allegations may include exclusion from management, diversion of value to a connected company, improper dilution, withholding information or use of company assets for the benefit of those in control.

Unfair prejudice is not simply a complaint that a minority shareholder has lost a vote. The court will consider the legal arrangements and the understandings governing the relationship. Where a claim succeeds, the court has broad powers, and a purchase of one shareholder’s shares is a common practical outcome in many cases.

We advise both shareholders considering a petition and those defending allegations of unfair prejudice. Because litigation can be expensive and disruptive, we also consider whether the dispute can be resolved through a negotiated buyout or governance settlement.

Director Misconduct and Breach of Duties

Directors’ general statutory duties under the Companies Act 2006 are owed to the company. They include duties to act within powers, promote the success of the company, exercise independent judgment and reasonable care, avoid conflicts of interest and declare interests in proposed transactions.

In a development SPV, disputes may arise where a director is accused of:

– authorising expenditure without proper approval;

– making payments to a connected business;

– using company information or assets for another project;

– preferring the interests of one shareholder over the company;

– withholding material financial information; or

– diverting a development or investment opportunity.

Not every poor commercial decision is a breach of duty. The facts, the director’s decision-making process, the company’s constitution and any authorisation are important. We can advise on the strength of the allegations, possible remedies and the evidence required.

Derivative Claims and Loss Suffered by the Company

Where the alleged wrongdoing has caused loss to the company rather than directly to an individual shareholder, a derivative claim may be relevant. This is a procedure under which a shareholder seeks permission to pursue a claim on the company’s behalf, commonly in relation to alleged director wrongdoing.

Derivative claims are procedurally distinct from unfair prejudice petitions and require careful consideration before proceedings are started. We can advise which route best matches the alleged conduct and the outcome being sought.

Funding Disputes and Shareholder Loans

SPVs commonly rely on a mixture of equity, shareholder loans and external development finance. A funding shortfall can therefore create both financial and governance disputes.

The parties may disagree about whether they are obliged to contribute more capital, whether further investment should dilute existing interests or whether one shareholder is entitled to fund the project alone on revised terms. Shareholder loan repayment and priority can also become contentious, especially when lender restrictions apply.

Before issuing shares, making a capital call or treating a shareholder as being in default, the relevant documents and company approvals should be checked carefully. A step intended to solve a funding problem can otherwise create a wider dispute over control.

Share Issues and Dilution

A new share issue may be commercially necessary to raise capital, but it can also change voting power and economic ownership. Disputes may arise over pre-emption rights, valuation, the purpose for which directors exercised their powers or whether the required shareholder consent was obtained.

If a proposed issue would materially dilute an existing shareholder, advice should be obtained before the shares are allotted. Similarly, a shareholder challenging an issue should act promptly where control of the company may change.

Removal of Directors

A company may remove a director by ordinary resolution under section 168 of the Companies Act 2006, subject to the statutory procedure, including special notice and the director’s right to be heard. The company’s articles and shareholders’ agreement should also be reviewed before action is taken.

Removing somebody as a director does not automatically remove their shareholding. It may also have consequences under a service agreement or employment arrangement and can become part of a wider unfair prejudice dispute.

We advise companies, shareholders and directors on the procedure, voting position and wider strategic consequences of a proposed removal.

Shareholder Buyouts and Valuation Disputes

Where trust has broken down permanently, a buyout can provide a cleaner outcome than prolonged litigation. The difficult question is often price.

Valuation issues may include the value of the underlying land, planning status, remaining development costs, external debt, shareholder loans, anticipated profit and whether any minority discount is appropriate. The articles or shareholders’ agreement may contain a contractual valuation mechanism that must be followed.

We can assist with negotiations, legal submissions on the valuation basis and the documentation required to transfer shares, settle shareholder loans and release guarantees. Where necessary, we can work with independent valuation or accounting experts.

Urgent Action in an SPV Dispute

Some disputes develop gradually, while others require immediate attention. Urgency may arise where:

– development land is about to be sold or charged;

– substantial project funds are being transferred;

– new shares are about to be issued;

– a director is being removed or appointed;

– borrowing or refinancing is imminent;

– company records or information are being withheld; or

– an opportunity or asset may be transferred to a connected business.

Depending on the circumstances, urgent correspondence, undertakings or interim court relief may need to be considered. The availability of any remedy is fact-sensitive, so prompt advice is important.

Documents We Commonly Review

Useful documents often include:

– the shareholders’ agreement and articles of association;

– subscription and investment agreements;

– share registers and Companies House filings;

– board and shareholder minutes;

– shareholder loan and funding documents;

– development finance agreements;

– development or project management agreements;

– management accounts, budgets and cashflow forecasts;

– valuations and development appraisals; and

– emails and other correspondence concerning the disputed decisions.

We can identify the priority documents after an initial discussion if you do not have the complete file.

How We Can Help

Our team can assist with:

– shareholder and director rights;

– interpretation and enforcement of shareholders’ agreements;

– deadlock and disputed governance decisions;

– unfair prejudice petitions;

– derivative claims where appropriate;

– breaches of directors’ duties;

– director appointment and removal;

– funding, share issue and dilution disputes;

– urgent protective applications;

– shareholder buyouts and valuation disputes;

– mediation and negotiated settlements; and

– court proceedings where a commercial resolution cannot be reached.

Our dispute resolution lawyers can work with JLN’s Shareholder and Director Disputes and property teams where the issues overlap.

Resolving the Dispute Commercially

Court proceedings are sometimes necessary, particularly where control or asset value requires urgent protection. However, a negotiated outcome can preserve more of the development’s economic value.

Settlement options may include changes to governance, revised funding, a buyout, repayment or restructuring of shareholder loans, a sale of the SPV or the underlying development, or an agreed division of future proceeds.

A mediation can be particularly useful because it allows corporate and property arrangements to be restructured as part of one overall settlement.

Frequently Asked Questions: Property SPV Shareholder and Director Disputes

Speak to Our Property SPV Dispute Solicitors

A shareholder or director dispute within a development SPV can quickly affect funding, control and the value of the underlying project. Early advice can help preserve the company’s position and prevent a corporate step from creating consequences that are difficult to reverse.

If you are dealing with deadlock, unfair prejudice, director misconduct, a funding dispute, director removal or a shareholder buyout, contact The Jonathan Lea Network to discuss your options.

For the wider services we provide in this area, see our Property Development Disputes Solicitors page.

Contact Us

We provide most enquiries with an indicative scope of work and fee estimate, based on the information you share. We aim to respond within one working day.

In the same email you will be invited to arrange a 20-minute complimentary, no-obligation video consultation, should the proposed scope of work and fee estimate be of interest. This initial discussion is designed to better understand your requirements, refine the scope and ensure our approach is fully aligned with your objectives, at the end of which we will email you a definitive formal fee estimate to consider and approve.

Where you would prefer to receive initial advice and guidance from the outset, or where a short introductory call would not be the most appropriate starting point, we may instead recommend a 2.5-hour fixed-fee appointment, starting from £700 + VAT. This enables us to review the information you provide, discuss your situation with you and provide considered, tailored advice at an early stage.

To make an enquiry, please email us at wewillhelp@jonathanlea.net, complete our contact form, or call us on 01444 708640.