Making A Clean Exit - Corporate Property JVs And The Role Of Directors

It is understandable that when parties come together to establish real estate joint venture (JV), their focus is firmly on the upside that can be achieved. As legal counsel, we must hope for the best but prepare for the worst. That includes ensuring that the legal documentation provides for how an exit from the JV is achieved – whether because the JV has completed its objectives, because the parties have decided to call time on the JV and go their separate ways or where there has been a default event leading to a irreparable breakdown of the commercial relationship. 

The terms of the joint venture agreement (JVA) will include making sure that the JV company’s role and the role of its directors is clearly stated to ensure the parties achieve the exit they want. A recent case in the Supreme Court has put into the spotlight the role of the director of a JV company in the exit process, in particular where a director is managing that process.

Exit options

Typically in a JVA, a number of exit options are present, including:

• Sale of the asset, distribution of the proceeds and winding up of the JV.
• One party transferring its interests in the JV to the other party.
• A new party coming in and acquiring the interests of the exiting party.
• A complete exit by all parties of the JV to a new buyer / buyers.

The role of JV company directors and the Saxon Woods case

The JV company itself will usually be a party to the JVA and will often have a role in the exit process, with the JV’s directors being key players in delivering the exit in accordance with the terms of the JVA.

As such, it is important that the JV’s directors understand and have in mind their directors’ duties in an exit scenario. 

The case of Saxon Woods Investments Ltd v Costa, which was before the UK Supreme Court earlier in 2026, involved an unfair prejudice petition under section 994 of the Companies Act 2006 brought by Saxon Woods in relation to the affairs of the JV company, Spring Media Investments Limited. 

The JV company was the subject of a shareholders’ agreement (SHA) a term of which provided that all the parties would work together in good faith towards a sale of the business by 31 December 2019.

The board of directors delegated the handling of the sales process to a director, Mr Costa. His view was that a delay in the sale beyond the agreed sale date would lead to a better result for shareholders. He was not open with the other directors with this policy, excluding them from correspondence and the process, and generally disregarding the provisions of the SHA containing the exit terms to which the shareholders had agreed. This was not a case of a director seeking to make a private profit from the JV Company - he was following a course of action that he considered to be the best for the JV. When the Covid-19 pandemic struck in early 2020, any hope of a profitable exit disappeared, leading to the claim the subject of the proceedings. 

The Supreme Court found that the director had breached his directors’ duties by making the decision to delay the sale process alone and without the wider sanction of the board and/or the knowledge of the shareholders. He had failed to give consideration in good faith to opportunities for exit and to engage with the wishes and objectives of the shareholders, as set out in the SHA. 

This is not to say that a director could not seek to depart from a set process contained in the SHA. However, to do that, one would need to go through the correct steps, i.e. being open and transparent with fellow directors and including them in necessary communications and decision making, and not engagng in misleading conduct. 

For further details of the Saxon Woods case, please see our earlier post here: Directors cannot go it alone: what Saxon Woods v Costa means for the boardroom - Burges Salmon.

Points to take away

The Supreme Court’s decision shows the importance for JV directors of the following:

• Understanding of the provisions of a JVA, and of the obligations placed upon the JV company itself.
• The role of the board in any exit scenario.
• The statutory directors’ duties imposed upon company directors by the Companies Act 2006.
• The requirement to demonstrate good corporate governance in all areas of decision-making, including transparency and the provision of comprehensive and accurate information to the board and to shareholders on matters relating to the exit.

Often in real estate JVs, notwithstanding the terms of a JVA which provides for all shareholders to appoint directors to the board there is one party who will be relatively passive and delegate the “day to day” of the JV to another shareholder/director. This case highlights the care that needs to be taken by all directors to adhere to the provisions of the SHA/JVA and comply with the statutory duties set out in the Companies Act.

JV directors should ensure that they act together in an open manner to make what they consider, collectively as a board, to be the best decision for the shareholders and not to pursue their own agendas, even if they believe they are doing so in the best interests of the JV company and shareholders.