Joint venture agreement, Fairhall Road refurbishment

Joint venture agreement template with contributions and split

An unincorporated joint venture has no company to fall back on, so everything a company structure would supply has to be written down. This one puts two builders together for a single $14.6 million refurbishment, splits it 55/45, and sets out who funds it, who decides, how a deadlock breaks and how either of them gets out.

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Unincorporated joint venture agreement

Fairhall Road Refurbishment

Between Marrowbone Construction and Stellan Build Group

Marrowbone Construction Pty Ltd
Commencing 3 August 2027
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Contents
Parties and the project
1
1. The venture and what it is not
2
2. Contributions
2
3. Interests, profit and loss
3
4. The management committee
3
5. Running the job day to day
4
6. Funding and cash calls
4
7. Bank account, books and reporting
5
8. Insurance
5
9. Tax and GST
5
10. Confidentiality and publicity
6
11. Default
6
12. Deadlock
6
13. Exit and buy out
7
14. Completion, winding up and general
7
Parties and the project

Made on 19 July 2027 between Marrowbone Construction Pty Ltd, ACN 118 442 907, of 44 Wren Street, Brunswick VIC 3056, and Stellan Build Group Pty Ltd, ACN 622 330 114, of 12 Pier Road, Port Melbourne VIC 3207. Each is a Participant and together they are the Venture.

The Participants are tendering together for the refurbishment of 34 apartments at 18 Fairhall Road, Coburg VIC 3058 for Kestrel Housing Trust, at a head contract sum of $14,600,000 over an 18 month programme. Neither Participant could carry the whole job alone, and this agreement governs how they carry it together.

$14.6M
Head contract sum
55 / 45
Profit split
$2M
Working capital
18 months
Programme
1. The venture and what it is not
1.1
One project, one venture
The Participants form an unincorporated joint venture for the sole purpose of tendering for, entering into and performing the head contract for the Fairhall Road refurbishment, and for nothing else. Another project needs another agreement.
1.2
Not a partnership, and not a company
The Participants do not intend to create a partnership, and nothing in this agreement makes one Participant the agent of the other except where this agreement says so. The Venture is not a company, a trust or a managed investment scheme under the Corporations Act 2001, and no Participant may hold itself out as having authority the committee has not given it.
1.3
Liability to the principal
Under the head contract both Participants are jointly and severally liable to Kestrel Housing Trust, whatever this agreement says. The 55/45 split governs what the Participants owe each other, not what the principal may recover from either of them.
2. Contributions
2.1
What each Participant brings
Each Participant provides the contributions below by 3 August 2027, or by the date the committee sets for a contribution that is needed later in the programme. A contribution in kind is valued at the rates agreed in the tender build up.
Contribution
Marrowbone, 55 per cent
Stellan, 45 per cent
Working capital
$1,100,000
$900,000
Site management
Project manager, two supervisors
Contracts administrator, estimator
Plant
Two telehandlers, scaffold, site sheds
Formwork, temporary power, hoists
Design coordination
Structural and services
Architectural and interiors
Bank guarantee, 5 per cent
$401,500
$328,500
Total capital and security
$1,501,500
$1,228,500
2.2
Prequalification and licences
Marrowbone holds the builder registration under which the head contract is signed and maintains it for the whole programme. Stellan maintains its own registration and its prequalification with the principal, and tells Marrowbone within two business days if either is suspended or conditioned.
3. Interests, profit and loss
3.1
The split
The Participants hold the Venture in the proportions 55 per cent to Marrowbone and 45 per cent to Stellan. Profit is distributed and loss is borne in those proportions, as are variations, extension of time costs, liquidated damages and defect rectification costs.
3.2
When profit is distributed
No profit is distributed before practical completion. After practical completion the committee may distribute surplus cash quarterly, keeping a retention of $400,000 against the defects liability period, which is released with the final accounts under clause 14.1.
4. The management committee
4.1
Who sits on it, and how it meets
Two representatives from each Participant. It meets fortnightly on site and otherwise on 48 hours notice. A quorum is three, including at least one representative of each Participant. The chair rotates monthly and has no casting vote, because a casting vote would make the 55 per cent Participant the whole committee.
4.2
Decisions, and reserved matters
Ordinary decisions are made by a simple majority of those present. The matters below need the written agreement of both Participants, whatever the shareholding says.
Signing, varying or terminating the head contract.
Any claim against the principal, or any settlement of one, above $100,000.
A subcontract above $500,000, or any subcontract with a related party.
Borrowing, or granting any security over Venture assets.
A cash call above $500,000 in any one call.
Admitting a new participant, or assigning any interest in the Venture.
5. Running the job day to day
5.1
The managing participant
Marrowbone is the managing participant. It runs the site, employs the site staff, holds the head contract correspondence and is the single point of contact with the principal and the superintendent. It is paid a management fee of 1.5 per cent of certified progress claims, charged as a Venture cost before profit.
5.2
Authority limits
The managing participant may commit the Venture to a single item up to $50,000 and to $250,000 in any calendar month without the committee. Anything above either limit needs a committee resolution, and a commitment split into parts to stay under a limit is treated as one commitment.
5.3
Access and audit by the other Participant
Stellan may attend the site, inspect the books and speak with the Venture’s staff at any reasonable time, and receives copies of all correspondence with the principal within two business days.
6. Funding and cash calls
6.1
Making a call
The committee may call for further funds when the Venture’s forecast cash position falls below $250,000. A call is made in writing in the 55/45 proportions and is payable within 14 days.
6.2
If a Participant does not pay a call
The other Participant may pay the shortfall. The unpaid amount carries interest at 9 per cent a year, is repayable on demand, and is deducted from the defaulting Participant’s next distribution. If it is unpaid for 30 days the paying Participant may convert it to an increased interest under clause 6.3.
6.3
Dilution
Conversion moves interest between the Participants in proportion to total capital contributed, recalculated across all contributions made to that date. Dilution is the only remedy for an unpaid call that changes the split, and it cannot take a Participant below 10 per cent.
7. Bank account, books and reporting
7.1
One account, two signatures
The Venture operates one bank account in the name of the Venture. Every payment above $20,000 requires one authorised signatory from each Participant, and no Venture money is held in either Participant’s own accounts, even overnight.
7.2
Books and the monthly report
Separate books are kept for the Venture on an accrual basis. By the 10th of each month the managing participant issues a report with the cost to complete, the forecast final result, progress claims made and certified, variations lodged and their status, and the cash position.
8. Insurance
8.1
What the Venture carries
The Venture takes out the policies below in the joint names of both Participants, with the premiums as Venture costs. Neither Participant settles a claim above $50,000 without the committee.
Cover
Sum insured
Held by
Contract works
$16,000,000
The Venture, both named
Public and products liability
$20,000,000
The Venture, both named
Workers compensation
As required by law
Each for its own people
Plant and equipment
Owner declared values
The owner of the plant
9. Tax and GST
9.1
Each Participant accounts for its own share
The Venture is not a separate taxpayer. Each Participant brings its share of Venture income and deductions into its own return, in the 55/45 proportions, and each is responsible for its own tax.
9.2
GST joint venture
The Participants will apply to form a GST joint venture with the managing participant as the joint venture operator, so that supplies between the Participants and the Venture are treated appropriately and one entity accounts for GST on the Venture’s supplies. Each Participant keeps its own GST registration.
10. Confidentiality and publicity
10.1
What stays inside
Tender rates, cost build ups, subcontract pricing and the principal’s information stay confidential during the Venture and for three years afterwards. Neither Participant issues a media release, a case study or an award entry naming the project without the other’s written approval.
11. Default
11.1
What counts as a default
Failing to pay a cash call within 30 days, losing the registration or prequalification the Venture depends on, committing the Venture beyond an authority limit twice in six months, becoming insolvent, or any breach that puts the head contract at risk of termination.
11.2
What the other Participant may do
Give written notice with 14 days to fix the default, or immediately in the case of insolvency. If it is not fixed, the non defaulting Participant may take over management of the Venture, and may buy the defaulting Participant’s interest under clause 13.2 at 85 per cent of fair value.
12. Deadlock
12.1
The escalation path
A reserved matter that is not agreed within 10 business days goes to the managing directors of each Participant, who meet within a further 10 business days. Work on the job continues while a deadlock is being resolved, because the programme does not wait.
12.2
If escalation fails
A deadlock about a valuation goes to an independent expert appointed by the parties, whose determination binds them. Any other deadlock goes to mediation, and if it is still unresolved 20 business days after the mediation, either Participant may start the buy out process in clause 13.1.
13. Exit and buy out
13.1
Offer and counter offer
A Participant wanting out gives written notice with a price for its interest. The other may buy at that price within 30 days, or sell its own interest at the equivalent price per percentage point. This keeps the price honest, because the Participant naming it may end up on either side of it.
13.2
Fair value where a price is not agreed
Fair value is determined by an independent expert appointed by the parties or, failing agreement, by the president of the relevant professional body. The expert values the interest on the forecast final result, the work in progress and the risk remaining, and reports within 30 days.
13.3
What the buyer takes on
A Participant bought out is released from future Venture obligations but stays liable for its share of anything that happened before completion of the buy out. The buyer uses reasonable endeavours to have the seller released from the head contract and the bank guarantees.
14. Completion, winding up and general
14.1
Winding up the Venture
The Venture continues until the later of practical completion and the end of the 12 month defects liability period. Final accounts are prepared within 60 days of that date, the retention under clause 3.2 is released, and any remaining assets are distributed 55/45.
14.2
General
Neither Participant may assign its interest without the other’s written consent. This agreement is the whole arrangement between the Participants about the project, may be varied only in writing signed by both, and is governed by the law of Victoria.
Unincorporated means the paperwork does the work
There is no company here to hold assets, no share register and no directors duties to fall back on. Everything that a company structure would supply, being who decides, who funds, who signs and how someone leaves, has to be written into this agreement instead.
Execution
15.1
Counterparts and authority
This agreement may be signed in counterparts, and the counterparts together form one agreement. Each person signing warrants that they are authorised to bind the Participant they sign for, and each Participant delivers a copy of the board resolution authorising this agreement within five business days of signing.
For Marrowbone Construction Pty Ltd
Name
:
Position
:
Date
:
For Stellan Build Group Pty Ltd
Name
:
Position
:
Date
:

Section by section

What each section is for, so you can keep the ones you need and drop the rest.

Cover and contents
A contract cover naming the project, then a contents list.
Parties and the project
Two builders with ACNs, the $14.6 million head contract and the 18 month programme.
1. The venture and what it is not
One project only, not a partnership or a company, and joint liability to the principal.
2. Contributions
A table of cash, people, plant, design and bank guarantees for each participant.
3. Interests, profit and loss
The 55/45 split, what it covers, and the retention held against the defects period.
4. The management committee
Composition, quorum, the rotating chair and a list of reserved matters.
5. Running the job day to day
The managing participant, its fee, its authority limits and the other's access.
6. Funding and cash calls
When a call is made, default interest, and how dilution works and its floor.
7. Bank account, books and reporting
Two signatures above $20,000, and the monthly report by the 10th.
8 and 9. Insurance, tax and GST
An insurance table in joint names, and how each participant accounts for tax.
11 to 13. Default, deadlock and exit
What counts as default, the escalation path and the buy out mechanism.
14. Winding up and general
Final accounts within 60 days, the retention release and governing law.

Clauses in this document

How to adapt this agreement

For a joint venture that will bid for several projects, split it into a framework agreement and a project schedule, because contributions and splits change from job to job and one document that mixes them becomes unusable. For an incorporated joint venture, move the governance into a shareholders agreement and a constitution, and keep only the project terms here. For a venture with an unequal risk profile, price that rather than shifting the split: a participant carrying the bank guarantees or the licence is often paid a fee before profit, as the managing participant is here.

Which law the terms follow

The agreement is governed by the law of Victoria, where the project is. It records that the venture is not a company, a trust or a managed investment scheme under the Corporations Act 2001, which is the clause that keeps an unincorporated venture from being treated as something it is not. The participants also apply to form a GST joint venture, so one of them accounts for GST on the venture's supplies.

What makes this document work

Contributions are listed in kind as well as in cash

Working capital of $1,100,000 and $900,000, then site management, plant, design coordination and bank guarantees of $401,500 and $328,500. The totals reconcile to the 55/45 split, so neither participant can later claim its telehandlers were worth more than the tender build up said.

The chair rotates and has no casting vote

Two representatives each, a quorum of three including one from each side, and a monthly rotating chair. The agreement says why there is no casting vote: it would hand every decision to the 55 per cent participant and make the committee decorative.

The exit is an offer that cuts both ways

A participant wanting out names a price for its interest, and the other may buy at that price or sell its own at the equivalent rate per percentage point. Naming a price you might end up on either side of is what keeps the number honest.

Questions people ask

What is an unincorporated joint venture?

Two or more businesses working together on a defined project without forming a company. There is no separate legal entity, so the participants contract directly with the principal and with each other, and everything a company would provide, being governance, funding rules and an exit, comes from the agreement instead.

How should profit be split in a joint venture?

In the proportions the participants actually contribute, and the same proportions should carry losses. Here it is 55/45 for profit, loss, variations, extension of time costs and liquidated damages alike, with no profit distributed before practical completion and $400,000 retained against the defects period.

What is a cash call and what happens if one is not paid?

A call for further funds when the venture's forecast cash falls below $250,000, payable in the 55/45 proportions within 14 days. If one participant does not pay, the other may pay the shortfall, charge 9 per cent a year on it, and after 30 days convert it into an increased interest under the dilution clause.

How does a joint venture break a deadlock?

A reserved matter not agreed in 10 business days goes to the managing directors of each participant, who meet within 10 more. Work continues while that happens. A valuation deadlock goes to an independent expert, anything else goes to mediation, and a deadlock that survives both starts the buy out process.

Does a joint venture pay its own tax?

An unincorporated joint venture is not a separate taxpayer. Each participant brings its share of income and deductions into its own return in the agreed proportions. The participants here also apply to form a GST joint venture so one of them accounts for GST on the venture's supplies.

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