Practical Examples

Model cases of consortium structuring with different profit distribution schemes.

Model Case A: Consortium for Medium-Sized Work

Medium-sized residential project in Sucre

Medium-Sized Residential Project in Sucre

This case illustrates the structuring of a consortium for the development of a residential project of 24 housing units in an urban expansion zone of Sucre. The project had a total budget of Bs. 8,500,000 and an estimated duration of 18 months.

Main Characteristics:

Participants: 4 partners with different contributions
Total Investment: Bs. 8,500,000
Duration: 18 months
Estimated Profit: Bs. 3,200,000 (37.6%)

Proposed Corporate Structure

For this project, a Limited Liability Company (S.R.L.) specifically for the consortium was designed with the following characteristics:

  • Share capital: Bs. 100,000 divided according to contributions
  • Corporate purpose: Specific for the development of the residential project
  • Duration: Fixed (24 months + 6 months for liquidation)
  • Management: General Manager appointed unanimously
  • Decision-making: Qualified majority (75%) for strategic decisions

The S.R.L. structure was selected for offering the optimal balance between liability protection for partners, administrative simplicity, and fiscal efficiency for this type of medium-sized residential project.

Contributions and Distribution

Partner Contribution Type Value (Bs.) Percentage
Partner A Land 2,550,000 30%
Partner B Capital + Materials 2,125,000 25%
Partner C Capital 2,125,000 25%
Partner D Professional Services 1,700,000 20%

Distribution Mechanism:

Profit distribution was strictly proportional to contributions, with a two-phase sharing: 70% at project completion and the remaining 30% at 6 months, after contingencies and guarantees are resolved.

Profit Sharing Simulation

Phase 1: Project Completion (70%)

Bs. 2,240,000
A
B
C
D

Phase 2: Post-Guarantees (30%)

Bs. 960,000
A
B
C
D

Total distribution per partner:

  • Partner A: Bs. 960,000
  • Partner B: Bs. 800,000
  • Partner C: Bs. 800,000
  • Partner D: Bs. 640,000
  • Total: Bs. 3,200,000

Legal Documentation of Distribution:

  • Project completion record certified by independent inspector
  • Shareholders' assembly resolution approving each distribution
  • Notarized records documenting each transfer made
  • Tax compliance certificates prior to each distribution

Model Case B: Large Project with Managing Partner

Commercial and Office Development in La Paz

This case presents the structuring of a consortium for a larger mixed-use project (commercial and office) in La Paz. The project included 3,500 m² of commercial area and 5,200 m² of offices, with a total budget of Bs. 42,000,000 and a 30-month execution period.

Main Characteristics:

Participants: 6 partners (1 manager + 5 investors)
Total Investment: Bs. 42,000,000
Duration: 30 months
Estimated Profit: Bs. 16,800,000 (40%)

Structure with Managing Partner

For this project, a Corporation (S.A.) was implemented with a managing partner in charge of project direction, with the following characteristics:

  • Share capital: Bs. 500,000 in registered shares
  • Share types: Class A (manager) and Class B (investors)
  • Duration: Indefinite with post-project dissolution clause
  • Management: 3-member Board of Directors (2 appointed by manager)
  • Management contract: Separate from bylaws, with specific obligations

The S.A. structure was selected due to project complexity and the number of investors, allowing for centralized professional management with control mechanisms and periodic reports to shareholders.

Role of Managing Partner

The managing partner assumed specific responsibilities in exchange for an additional incentive on profits:

Main Responsibilities:

  • Executive project direction
  • Hiring and supervision of technical teams
  • Permit and approval management
  • Financial management and periodic reports
  • Unit commercialization

Incentive Scheme:

  • Base: 15% share for capital contribution (Bs. 6,300,000)
  • Success fee: Additional 10% on total profits
  • Deadline compliance bonus: up to additional 5%

The scheme directly linked the manager's additional remuneration to project success and meeting predefined objectives.

Penalty Clauses:

The contract included specific penalties for missing deadlines, unjustified cost overruns, or unauthorized project deviations, which could reduce the success fee by up to 100%.

Distribution by Progress Milestones

1

Milestone 1: Structure Completion (25% progress)

Distribution: 15% of estimated profit

15%

Bs. 2,520,000 distributed proportionally, except managing partner who receives only base (no fee).

2

Milestone 2: Enclosure and Exterior Finishes (50% progress)

Distribution: 20% of estimated profit

20%

Bs. 3,360,000 distributed proportionally, except managing partner who receives only base (no fee).

3

Milestone 3: Interior Finishes (80% progress)

Distribution: 25% of estimated profit

25%

Bs. 4,200,000 distributed proportionally, except managing partner who receives only base (no fee).

4

Milestone 4: Completion and Handover (100% progress)

Distribution: 40% of estimated profit + manager fee

40%

Bs. 6,720,000 + manager success fee (Bs. 1,680,000) + compliance bonus if applicable.

Milestone Verification Process:

  • Certification by independent inspector
  • Approval by board technical committee
  • Financial audit prior to each distribution
  • Verification of deadline compliance and quality

Required Legal Documentation:

  • Board record approving each distribution
  • Technical report certifying actual progress
  • Audited financial statements per milestone
  • Notarized documentation of each distribution

Lessons Learned and Recommendations

Practical knowledge derived from our experience in consortium structuring

Exhaustive Documentation from the Start

Experience shows that detailed and complete documentation from consortium inception prevents over 90% of potential conflicts. We recommend:

  • Documented and certified valuation of all non-monetary contributions
  • Notarized protocolization of sharing agreements with specific formulas
  • Establishment of gradual conflict resolution mechanisms

Strategic Tax Planning

The consortium's tax structure significantly impacts final returns for all participants. Our key recommendations:

  • Prior tax analysis to select optimal corporate structure
  • Phased distribution planning to optimize tax burden
  • Specific documentation to support expense deductibility
  • Individual tax impact evaluation for each participant

Mechanisms to Avoid Conflict

Consortium conflicts usually arise at specific project moments. We recommend implementing:

  • Mediation and arbitration clauses specific to the construction sector
  • Independent technical committees for technical controversy resolution
  • Mandatory periodic reporting and communication protocols
  • Orderly exit mechanisms for partners in case of irreconcilable differences

Want a custom structure for your project?

Contact us to analyze your project's specific characteristics and design the optimal consortium structure.

Request personalized consultation