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Venture into that Venture

Shared ownership in a renewable energy project is any arrangement whereby the community (usually in the form of an already established body) invests in a renewable energy project.  There are a number of benefits to community involvement; communities can make decisions which impact them, it can provide employment opportunities and may prove to be a healthy income stream.  As with any commercial venture however, there are risks and it is important to acknowledge this before getting involved.  Investment is long-term so do not have any misconceptions about making substantial returns immediately.  Returns can also fluctuate and there can be constructions delays which may impact the project.

A joint venture is a commercial arrangement between two or more parties, for example the landowning company, the developer company and the established community body.  One of the biggest considerations for any party is funding.  If choosing to invest, make sure that you have funds available.  Funding can come in a variety of forms; grants, banks and other financial institutes or from private equity.  There are likely to be conditions attached however, including specific grant conditions and the necessity of providing some form of security.

A community body should also consider at what point they would like to invest.  Early investment may offer greater incentives and the ability to offer less capital but, there may be a higher risk.  Later investment may mean that some of those unknowns have been ironed out and therefore investment is less risky but this inevitably means less incentives and higher capital.

The two most common commercial vehicles to take forward the joint venture is a limited liability company and a limited liability partnership.  Given that there are a number of parties coming together you will want to take some time to consider some practical points such as; directors and shareholders (or members in the case of an LLP) and their respective duties, attendance at meetings and voting rights, whether there should be any reserved matters and in the case of a company transfer of shares.  Articles of Association are required for any incorporated company and it is thoroughly recommended that a Shareholders Agreement (or Joint Venture Agreement) in respect of a company and a Partnership Agreement (or a Joint Venture Agreement) in respect of an LLP is entered into.

Take some time at the outset to consider the type of arrangement that is best for you and your project and it is recommended that you seek legal and tax advice.  It is appreciated that parties are keen to proceed with the project itself but taking some time to deal with these admin points at the outset may very well save you time and money further down the line.  Get to know your business partners as you are entering into this venture together and consider whether non-disclosure or confidentiality agreements are required. 

There is no one size fits all, each arrangement with be party and project specific.  If you would like to discuss entering into a joint venture arrangement but are unsure how to begin, please contact Kirstin Ejsmont or Angus Easton, or call 01224 632464.

Kirstin Ejsmont recently presented at CARES Conference 2019 at Perth Racecourse, speaking to landowners, developers and community body representatives about joint venture arrangements in a shared ownership renewable energy project.

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