Independent Directors Beyond Commercial Real Estate: Infrastructure, ABS, Aviation, Solar, and Receivables

Independent Directors

Most of what is written about independent directors and independent managers is written for the commercial real estate market, because it is often required for CMBS, CRE CLO, life company, debt fund, syndicated loans, and balance sheet real estate that all require bankruptcy-remote special purpose entities, and the CRE market produces a high volume of them.

But the structural problem the independent director solves is not only a real estate problem, it is a solution of isolating an asset and its cash flows from the credit of the sponsor that assembled them and limiting risk. That problem appears wherever an investor is asked to underwrite a specific asset rather than the operating company standing behind it.

If you are financing infrastructure, asset-backed lending, receivables pool, airplanes, or solar farm, you are almost certainly looking at the same governance architecture similiar to what is needed for commercial real estate . The vocabulary may shift by market but the mechanics do not.

This article walks through where the requirement appears outside traditional CRE, what genuinely differs from one asset class to the next, and the questions worth asking regardless of what the collateral happens to be.

The Common Structure Underneath Very Different Assets

Strip away the asset class and the pattern is consistent.

A sponsor forms an entity whose organizational documents restrict it to a single purpose, to own specific assets and then borrows against those assets. Investors and lenders need confidence in two things: that distress at the sponsor level will not sweep the entity into a consolidated proceeding, and that the entity itself will not be placed into bankruptcy for tactical reasons while the collateral is still performing.

Three structural features answer that concern in most transactions. Separateness covenants keep the entity operationally and financially distinct from its affiliates. A restriction on voluntary insolvency filings requires the consent of an independent person before the entity can file. And for limited liability companies, a springing member provision prevents the entity from dissolving if the sole member ceases to be a member, preserving continuity when the sponsor above it fails.

The independent seat is the piece that requires an actual person with an actual duty. The independent director or independent manager has to be appointed, has to remain current, and has to be reachable when a decision is genuinely required.

That is why the seat behaves the same way in a solar portfolio as it does in an office building financing. The document language differs. What the person is being asked to do does not.

Where the Requirement Appears Outside Commercial Real Estate

Infrastructure and Project Finance

Toll roads, pipelines, data centers, ports, water systems, district energy, transmission, and public-private partnership concessions are typically financed at a project company level, with the lenders' recourse limited to project assets and revenues.

Two features make ring-fencing central to the credit. The project company frequently sits beneath a sponsor that carries its own leverage and its own construction risk elsewhere. And the concession agreement or offtake contract, rather than a hard asset, is often the collateral that actually matters. A contract-based collateral package is worth what it is worth only if the entity holding it stays out of a sponsor's proceeding.

Independent governance at the project company, or at an intermediate holding company above it, is a routine request from project lenders and from rating agencies reviewing project bonds. Construction-period risk sharpens the point further: a sponsor facing cost overruns has an obvious incentive to seek the leverage a filing provides, and lenders underwrite against exactly that.

Asset-Backed Securitization

ABS is where the special purpose vehicle concept took its modern form. Auto loan and lease pools, equipment leases, franchise fee and whole business securitizations, timeshare receivables, container and railcar leases, consumer credit programs, and marketplace lending platforms all depend on a true sale of assets into an issuing entity structured to be bankruptcy remote from the originator.

The originator here is typically an operating company with real, ongoing credit risk. That makes the separation more load-bearing than it is in a single-asset real estate deal, where the sponsor may be little more than a holding vehicle. Rating agencies reviewing these programs look closely at whether the issuer can be filed into bankruptcy at the originator's discretion, and the non-consolidation and true sale opinions delivered at closing depend on the governance structure holding together as described in the documents.

The independent requirement, and the diligence supporting it, is a standard part of that package rather than a negotiated extra.

Aviation and Airports

Aviation finance uses these structures at two distinct levels, and it is worth keeping them apart.

Aircraft and engine portfolios are securitized through issuers holding leases and residual value interests, sometimes orphaned from any sponsor entirely. The governance requirements resemble any other ABS issuer, with the added complication that the assets are mobile, internationally registered, and subject to their own cross-border insolvency and repossession regimes.

Separately, airport concessions, terminal redevelopment, fuel systems, parking structures, and consolidated rental car facilities are financed at project company level using the same logic that governs infrastructure generally. These are long-tenor structures, often tied to a municipal or authority counterparty, and they routinely outlive the sponsors and service providers that were in place at closing.

Solar and Renewable Energy

Utility-scale solar, wind, storage, distributed generation portfolios, and increasingly renewable natural gas are financed through project companies, and, over the past decade, through securitizations of residential and commercial solar loan and lease pools.

Two features make the governance question particularly live in this sector.

Tax equity and back-leverage introduce additional parties whose entire economics depend on the project entity remaining outside a sponsor bankruptcy. A tax equity investor holding an interest in a partnership above the project company has a direct stake in the entity's continuity that has nothing to do with the debt.

And the sector has seen enough sponsor, developer, and installer distress to make investors specific rather than theoretical about whether the entity holding the assets can be pulled into a parent proceeding. In a market where the operating company originating the contracts may be under real pressure while the underlying assets keep producing revenue on schedule, the separation between the two is the whole investment thesis.

Receivables and Trade Finance

Trade receivables facilities, healthcare receivables, factoring programs, supply chain finance conduits, and merchant advance pools all involve selling receivables into an entity structured so that the buyer's interest survives the seller's insolvency.

Because the seller is almost always an operating company with genuine credit risk, and because receivables are a revolving rather than static pool, the separation between seller and purchasing entity carries the entire structure. Independent governance at the purchasing entity is standard, particularly where a bank-sponsored conduit or a rated facility is involved and where the facility is expected to revolve for years across changing pool composition.

What Actually Changes Across Asset Classes

In every one of these financing types, someone independent of the sponsor is asked to exercise judgment, on behalf of the entity, on a narrow list of material actions. That person owes duties to the entity itself. That duty is what distinguishes the arrangement from a creditor veto, and it is why courts have enforced these provisions when they have been drafted properly and declined to enforce them when they have not.

What varies is worth understanding, because getting it wrong creates avoidable friction at closing.

Who reviews the appointment varies. In commercial real estate, the appointment is usually confirmed by lender's counsel and, in rated transactions, by the rating agency. In ABS and project bonds, rating agency structured finance criteria tend to drive the requirement more directly, and the closing opinions depend on the structure matching what was represented.

The number of seats varies. A commercial real estate financing commonly requires one or two independents at the borrower, and sometimes at a special purpose member above it. Larger structured finance programs may require independents at multiple tiers, at the depositor, at the issuer, and at any intermediate transferor in the chain.

The tenure varies, and this is the one most often underestimated. A single-property CRE loan runs a defined term with a defined maturity. A master trust program, an airport concession, or a long-tenor infrastructure financing may run for decades, across multiple issuances, multiple sponsor changes, and multiple refinancings. The longer a structure lives, the more likely it becomes that an appointment has gone stale, that a provider has been acquired or has exited the business, or that the named individual is no longer serving. That gap tends to surface at precisely the moment it is most expensive to discover.

Questions Worth Asking, Whatever the Asset Class

If you are structuring, reviewing, or acquiring a position in one of these transactions, the same short list applies and it is not asset-specific.

Do the documents use the correct title for the entity type? 

Director for a corporation, manager for a limited liability company, trustee for a statutory trust. Mixed usage inside a single document set is a signal that the provisions were adapted from a template without a close read.

Do the documents preserve the independent person's duties rather than disclaim them? 

A provision directing the independent person to consider the interests of the entity, including its creditors, is what makes the consent right defensible. A provision stripping those duties makes it look like something else entirely.

Do the documents bar action requiring unanimous consent while the seat is vacant, and require a replacement before a removal takes effect? 

These two provisions work together, and the second one does real work when a sponsor is tempted to clear the seat before making a decision.

Does the engagement give the independent person a realistic opportunity to review a material action? 

Access to the documents, reasonable time to consider them, and the ability to engage advisors. A signature page presented on short notice does not produce the considered judgment the structure assumes.

These are the same questions in a Chicago mixed-use financing, a residential solar securitization, a receivables conduit, and an airport concession and often are the same answers

Building Resilient Structures

At SPE Specialists, we provide independent director, independent manager, and springing member services for special purpose entities across commercial real estate and structured finance, including infrastructure and project financings, asset-backed transactions, aviation and airport projects, solar and renewable energy, and receivables facilities.

We review the governing documents substantively rather than simply signing a signature page, because the provisions that determine whether a structure holds are written long before anyone needs to rely on them. If you are structuring a transaction outside traditional commercial real estate and need to confirm what the independent governance requirements will be, or need to verify that an existing appointment is current, we are glad to discuss it.

This article is provided for general informational and educational purposes. It is not legal advice, and it does not create an attorney-client or advisory relationship. SPE Specialists provides governance services and does not practice law. Structural requirements vary by jurisdiction, entity type, rating agency criteria, and the specific documents governing a transaction. Readers evaluating a specific structure should consult qualified counsel.