Reserved matters in a construction JV: when majority control should stop

A JV that requires unanimity for every decision is usually too slow; a JV that allows simple majority for every decision can expose minority members to risks they never intended to accept. Reserved matters are the bridge between those extremes. They identify decisions that are too consequential to leave to routine majority control and assign a higher approval threshold.

Typical reserved matters include material changes to bid price or contract value, changes to member participation, additional borrowing, guarantees and indemnities, major settlement or waiver of claims, related-party transactions, replacement of the Project Director, material amendments to scope allocation, insolvency actions, admission of a new member, sale or assignment of participation, termination of the employer contract, commencement or settlement of major arbitration and amendments to the JV agreement itself. The exact list should be project-specific; a process plant JV may add technology-license decisions while a road JV may focus more heavily on quarry, land and subcontract packages.

A veto should protect exposure, not create bargaining leverage on unrelated matters. If a 10% member has an unconditional veto over every subcontract and every programme change, that member can paralyse a project while bearing only a small share of the cost. Conversely, if the 70% member can issue unlimited guarantees or settle claims that affect every partner's joint-and-several liability, the smaller members are under-protected. The reserved-matter list should therefore be tied to objective thresholds where possible: monetary value, percentage of contract value, extension of time beyond a defined limit, increase in guarantee exposure or change in scope responsibility.

Supermajority structures can reduce the binary choice between simple majority and unanimity. In a 50/30/20 JV, a 75% threshold means the 50% member needs at least one partner, while the 30% and 20% members cannot act without the largest member. That can be useful, but it still does not protect every member. If a decision directly changes one member's allocated scope or increases only that member's guarantee, a separate affected-member consent may be more appropriate than a generic supermajority.

JV and consortium structures are highly project-, jurisdiction- and contract-specific. The bidding document, employer contract, JV/consortium agreement, corporate approvals, competition rules, tax treatment and applicable law govern the live arrangement. This series explains engineering, tender, commercial and governance risks; it is not legal, tax or accounting advice.