Insurance funds can invest in government land reserve projects through a debt investment scheme in four ways. In the last issue of this magazine, we introduced two of these ways. This article will look at the other two investment structures: indirect investment by insurance funds, and build-transfer franchising.
Under this arrangement, a trustee is instructed by a principal to establish a debt investment scheme, through which insurance funds are channelled into a project company jointly funded by the trustee and a developer. The project company will take charge of the development of land reserve projects. The trustee and the developer will be the shareholders of the project company and will share any profits from the development. In this model the trustee, as a shareholder of the project company, has limited exposure to liability during the initial phase of preparing land for development.
With respect to the apportionment of liability between entities, the trustee is exposed to lower risk than in the second model discussed in the previous issue. However, difficulties may arise if the project company is unable to obtain the permissions required for the development in a short period of time.
Wang Jihong is the managing partner of V&T Law Firm. She practises in the field of infrastructure development. Gao Lei is a lawyer at V&T Law Firm