A club deal, several investors coming together for a single asset without the apparatus of a fund, is one of the most common structures in European real assets and one of the most frequently underdocumented. The economics are usually agreed quickly because they are simple. The governance is usually agreed slowly or not at all, and the governance is what decides how the investment ends.
Why investors choose a club over a fund
A club deal offers what a fund cannot: the investor sees the specific asset, decides on it individually, and is not paying for a blind pool or a management fee on undrawn commitments. For an investor with the capacity to assess assets, that is a materially better proposition. The cost is that everything a fund’s documentation would have settled in advance has to be settled here, deal by deal.
The regulated alternative is the European long-term investment fund. Under Regulation (EU) 2015/760 as amended by Regulation (EU) 2023/606, which applies from 10 January 2024, an ELTIF must invest at least 55 per cent of its capital in eligible investment assets, and real assets, meaning assets with an intrinsic value due to their substance and properties, are one of the eligible categories in Article 10(1). Where an ELTIF is marketed solely to professional investors the investment limits in Article 13(2) to (4) fall away, but the 55 per cent floor in Article 13(1) does not. Borrowing is capped at 50 per cent of net asset value for an ELTIF that can be marketed to retail investors and 100 per cent where it is marketed solely to professional investors, with a maturity no longer than the life of the fund and currency matched or hedged.
When a club deal becomes a fund
The line that matters is not the number of investors or the size of the cheque. It is the definition in Article 4(1)(a) of Directive 2011/61/EU on alternative investment fund managers, in the consolidated text applicable from 16 April 2026. An AIF is a collective investment undertaking which raises capital from a number of investors with a view to investing it in accordance with a defined investment policy for the benefit of those investors, and which does not require authorisation as a UCITS. Two limbs, both of them necessary. Article 2(2) then removes the escape routes that people reach for first: whether the vehicle is open-ended or closed-ended, the legal form under which it is constituted, and the legal structure of the manager are all expressly of no significance.
The exclusions are narrower than they look. Article 2(3) lists seven categories of entity outside the Directive, holding companies first, and the definition of holding company in Article 4(1)(o) does the real work. It requires a company with shareholdings whose commercial purpose is to carry out a business strategy through its subsidiaries, associated companies or participations in order to contribute to their long-term value, and which is either operating on its own account with shares admitted to trading on a regulated market in the Union, or not established for the main purpose of generating returns for its investors by means of divestment of its subsidiaries or associated companies, as evidenced in its annual report or other official documents. A club vehicle that holds the asset directly does not meet the opening words at all, having no shareholdings in other companies, and one built to realise its subsidiaries inside a defined window does not meet the second limb. Recital 8 mentions joint ventures as falling outside the scope, but Article 2(3) does not list them, so the argument has to be built on the definition rather than on the recital.
In the Netherlands the analysis does not change, because Article 1:1 of the Wet op het financieel toezicht defines a beleggingsinstelling by direct reference to Article 4(1)(a) of the Directive. What follows is the prohibition in Article 2:65, and it prohibits three things rather than one. It forbids managing a Dutch investment institution. It forbids offering participation rights in an investment institution in the Netherlands, any investment institution and not only a Dutch one, so a foreign fund offered here is caught. And it forbids a Dutch manager of an investment institution from managing an investment institution or offering participation rights in one, with no territorial limit at all, which is the limb a Dutch sponsor running a non-Dutch club vehicle for investors outside the Netherlands tends to read past. What must be held is a licence granted by the Autoriteit Financiële Markten, either by the manager or, where the vehicle is an investment company with no separate manager, by the company itself. In practice a club crosses the line when the sponsor acquires discretion over acquisition and disposal for a pool of investors who no longer decide asset by asset, when a defined investment policy appears in the documents, and when successive deals are put to the same group. Investors who approve each asset individually and hold real governance rights at the vehicle look less like a pool.
What the de minimis thresholds do not exempt
Article 3(2) of the Directive is routinely described as a single threshold. It is two, and they are not interchangeable. Point (a) covers managers whose portfolios of AIFs have assets under management, including any assets acquired through the use of leverage, not exceeding EUR 100 million in total. Point (b) covers managers whose portfolios do not exceed EUR 500 million, but only where those portfolios consist of AIFs that are unleveraged and have no redemption rights exercisable during a period of five years following the date of initial investment in each AIF. Both points aggregate assets managed directly or indirectly through a company linked to the manager by common management or control or by a substantive direct or indirect holding, so a sponsor cannot split a programme across vehicles and read each one on its own. Directive (EU) 2024/927, which Member States were to apply from 16 April 2026 with two measures deferred to 16 April 2027, left both figures untouched.
What the relief actually gives is narrow. The opening words of Article 3(2) say that only paragraphs 3 and 4 apply, and say so without prejudice to Article 46, which preserves the supervisory powers of the competent authorities. Paragraph 3 sets a floor rather than a closed list, because Member States must ensure that these managers at least do five things: register with the home competent authority, identify themselves and the funds they manage at the time of registration, provide information on the investment strategies at the time of registration, report regularly on the main instruments traded and on the principal exposures and most important concentrations so that systemic risk can be monitored, and notify the home competent authority in the event that they no longer meet the conditions in paragraph 2. It also preserves any stricter national rules, and it requires the manager to apply for authorisation within 30 calendar days once those conditions are no longer met. Notifying and applying are distinct obligations, and Article 3(3) attaches no period of its own to the notification, so the 30 days run for the authorisation application and do not postpone the moment the supervisor has to be told. Paragraph 4 withholds every right the Directive grants unless the manager opts in, and opting in makes the Directive apply in its entirety. Paragraph 6 leaves the calculation of the thresholds, and the treatment of managers who occasionally exceed or fall below them in the same calendar year, to delegated acts, and it deals with the obligation to register and the obligation to notify under separate heads. The delegated act adopted under that paragraph, Commission Delegated Regulation (EU) No 231/2013, sets that treatment in Article 4, and the line it draws is not the calendar year. It also supplies the period the Directive left open, because Article 4(2) and Article 4(3) each require the manager to notify the competent authority without delay. The question is whether the excess is of a temporary nature, and Article 4(4) provides that a situation is not of a temporary nature if it is likely to continue for a period in excess of three months. A manager that considers the excess not to be temporary must notify without delay and seek authorisation within 30 calendar days. A manager that considers the excess temporary is not left with nothing to do until the recalculation, which is the reading the three-month rule invites and the one that gets managers into trouble. Article 4(3) requires it to notify the competent authority without delay as well, stating that it considers the situation temporary, and the notification must include supporting information justifying that assessment, with a description of the situation and an explanation of the reasons for considering it temporary. Recital 7, which is a recital and not an operative provision, indicates what that assessment should weigh: anticipated subscription and redemption activity or, where applicable, capital draw-downs and distributions, and it says the manager should not use anticipated market movements as part of the assessment. In real assets that closes the argument that is reached for first, which is that an excess produced by revaluation is temporary because the valuation will come back down. Three months after the date on which the threshold was exceeded the manager must in any event recalculate, either to show that the total value of assets under management is back below the threshold or to demonstrate to the competent authority that the situation has been resolved and that an application for authorisation is not required. So a manager that crosses the threshold in February and comes back under it in November has stayed inside one calendar year and must still apply for authorisation.
The Dutch implementation adds a second condition that is easy to miss. Article 2:66a of the Wet op het financieel toezicht disapplies the licence requirement only where the assets under management test in point (a) is met and, cumulatively, one of three conditions in point (b) holds: the participation rights are offered to fewer than 150 persons, or they can be acquired only for a consideration of at least EUR 100,000 per participant, or they have a nominal value per right of at least EUR 100,000. Point (b) drops away where the rights are offered exclusively to professional investors. Even then the manager must notify the AFM, supplying the data needed to identify itself and its funds together with information on their investment strategies, and must report periodically on its main instruments, principal exposures and largest concentrations. Where the offer is not made exclusively to professional investors, the offer itself and any advertising must state that the manager is not licensed and is not supervised, in the form the AFM prescribes. Paragraph 4 governs the way out of point (a), and it imposes the same two obligations the delegated act does. A Dutch manager that no longer meets the assets under management test in point (a) must inform the AFM onverwijld, without delay, and apply for a licence under Article 2:65 within 30 days. The second sentence of that paragraph is the part worth knowing, because Article 2:65 does not apply to a manager that has complied with the first sentence until the day the decision on the licence application is taken. Notifying and filing on time therefore buys a lawful wait instead of one in breach of Article 2:65, and missing either step forfeits it. Losing point (b) has no such route: Article 2:65 applies from that moment, with no notification step, no 30 days and no safe harbour. The light regime is a filing regime with a health warning attached, not an absence of regulation.
Control is the first question
Who decides. Day-to-day asset management decisions have to sit with one party, usually the sponsor or operating partner, or nothing happens. Major decisions, sale, refinancing, capital calls, change of business plan, belong to the investors, by a defined majority. The list of what counts as major has to be written down, because the arguments in a club deal are almost always about whether a particular decision required consent.
In a club deal the economics are agreed in an afternoon and the governance is agreed reluctantly. It is always the governance that determines what the investment is worth.
Where the list is written down matters as much as what it says. Under Article 2:239 of Book 2 of the Dutch Civil Code, the board manages the company subject to restrictions under the articles, and board resolutions can be made subject to the approval of another corporate body only by or under the articles. A consent right that lives only in a shareholders’ agreement binds the signatories to each other; it does not, by itself, constrain the board. The articles may also provide that the board must follow the instructions of another corporate body, and the board is then obliged to follow them, but only unless they conflict with the interest of the company and its business, a limit that cannot be contracted away because the same article requires directors to be guided by that interest.
The money terms beyond the split
Beyond who owns what, the terms that matter are the waterfall, the preferred return, the promote and when it is paid, and what happens if further capital is needed. That last one is the sharpest: if the asset needs money and one investor will not or cannot fund, the mechanism, dilution, a loan from the funding party at a stated rate, or something else, has to be agreed before it is needed. A club deal with no failure-to-fund mechanism has a hole where its most likely crisis will occur.
A financing bank reads the same documents in a different order. It starts with the reserved matters list, because its own consent rights have to sit above it rather than beside it, and a majority of investors able to change the business plan without the lender is a defect the credit committee will find. It tests whether the equity cure and the failure-to-fund mechanism can actually produce cash within the cure period, which is a question about the articles and the commitment letters rather than about intentions. It checks that its security can be perfected: a Dutch mortgage is created under Article 3:260 of Book 3 by a notarial deed between the parties followed by registration in the public registers, and the deed must identify the secured claim or the facts from which it can be determined and state the amount, or the maximum amount, recoverable. And it asks for the share transfer restrictions to be drafted so that enforcement is not blocked, a check that runs in the opposite direction from the way it is usually put. Under Article 2:195, unless the articles provide otherwise, a valid transfer of shares requires the shareholder who wants to dispose of them to offer them to the co-shareholders first. The pre-emption is the statutory default and the articles are the only thing that can switch it off, so articles silent on transfer are articles carrying the legal block in full, and a share pledge over that company is worth considerably less than it appears on the term sheet.
Deadlock and exit
Two investors with equal stakes and no deadlock mechanism is a structure that can freeze permanently. The standard answers, a buy-sell provision, a drag and tag arrangement, an agreed sale date, all work, and any of them is better than none. Equally important is the exit horizon: investors who agree the asset will be sold within a defined window rarely fall out over timing, and investors who leave it open frequently do.
An early exit also has a tax price that is set by a threshold nobody discusses when the percentages are agreed. Article 4 of the Wet op belastingen van rechtsverkeer treats shares in a legal person as immovable property where its assets, at the time of acquisition or at any time in the preceding year, consist for the greater part of immovable property and at the same time at least 30 per cent of the assets consist of immovable property situated in the Netherlands, provided the property as a whole is wholly or mainly used for acquiring, disposing of or exploiting it. For a corporate acquirer, tax is levied only where it holds, alone or together with a connected body or connected individual and counting shares it already owns and shares still to be acquired under the same or a connected agreement, an interest of at least one third. The rate is 10.4 per cent under Article 14, reduced to 8 per cent to the extent the shares relate directly or indirectly to a dwelling. Whether one club member can buy out another without a charge therefore depends on where the original stakes were set.
The vehicle and where it sits
Club deals for European assets are frequently held through a Dutch structure, for the reasons set out in our note on owning European real estate through a Dutch holding: a neutral, well-understood jurisdiction, treaty access for investors from several countries, and a clean structure at exit. Where investors are resident in different countries, the vehicle has to work for all of them, which is an analysis to run before the money moves rather than after.
The fund for joint account is where the regulatory question returns as a tax question. Under Article 2 of the Wet op de vennootschapsbelasting 1969, a fonds voor gemene rekening exists only where the fund is one for obtaining benefits for its participants by investing or otherwise applying money for joint account, and it qualifies as a beleggingsfonds or an undertaking for collective investment in transferable securities within the meaning of Article 1:1 of the Wet op het financieel toezicht, and participation is evidenced by tradable certificates of participation. Certificates are expressly not treated as tradable where disposal can take place only to the fund itself. The definition that decides whether the sponsor needs a licence also decides whether the vehicle is opaque for corporate tax, so the two analyses have to be run together. And a redemption-only clause, which a club deal often wants anyway to keep the membership closed, is what keeps the vehicle transparent.
Where the deals come from
Club deals depend on access, and access to European real assets is largely relationship-driven rather than intermediated. We deal with that reality in our note on how European real estate deals actually reach an investor. An investor without access is dependent on what is being marketed, which is a materially different opportunity set from what is being transacted.
Access also sets the order in which the documents have to be produced, and that order is where most club deals lose time. The reserved matters list and the failure-to-fund mechanism belong in the term sheet, before exclusivity, because both of them have to end up in the articles and the articles cannot be settled in the last week. The articles and the shareholders’ agreement are drafted together rather than in sequence, since Articles 2:192, 2:216 and 2:239 decide which promises are effective in which document. The notarial deed fixes completion and cannot be accelerated. And where the manager is relying on the registration regime, the terms of the offer are fixed before it goes out, because the conditions in Article 2:66a attach to the offer itself: the number of persons approached, the minimum consideration per participant, and the statement that the manager is neither licensed nor supervised.
Montclare manages and structures European real assets for institutional and private investors, from acquisition through to exit. Our services are set out on our services page.
This article is informational and does not constitute investment, tax or legal advice. Asset management and investment advice are regulated activities and the treatment of any transaction depends on its facts. Each engagement is subject to scope and applicable regulation.