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What is a Consortium?

A consortium may refer to a collective group formed by business people to establish more favorable business benefits.
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  • Written By: Mary McMahon
  • Edited By: Bronwyn Harris
  • Last Modified Date: 21 July 2014
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A consortium is a collective group, typically one made up of other groups like businesses, educational institutions, libraries, or financial companies. It is also possible to find one made up of individuals, such as a group of investors that bands together to create support for a project. When organized well and along cooperative lines, this type of group can be an incredibly powerful tool that benefits all of the individual members.

The concept of forming consortia in businesses is quite ancient. Many people in business are aware that, if they band together with people who have similar interests, they can create a powerful force to negotiate better contracts and pricing along with a more favorable business climate. As a result, traders historically often formed strong groups for the purpose of making expeditions to remote places and negotiating better terms, and this tradition has been carried on to the present day.

Academically, a consortium can also be a very useful tool. Many colleges cooperate in this way so that they can pool academic resources like libraries, laboratories, and research funding. The formation also encourages students to partner with each other, forging strong relationships and bonds that can be built upon in the future.

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It is also not uncommon to see a business seek out a consortium of like-minded investors. Startups often need a great deal of capital, and they know that it can be challenging to obtain capital from a single funder, or from a group of funders that is too scattered. By encouraging the foundation of a startup group, the company can get the capital it needs, along with financial security, as each individual member wants to ensure that the company survives so that the collective is not forced to deal with the penalties.

The structure of such a group varies, depending on the agreement the members reach. In some cases, each member is a distinct entity, retaining all of its own assets, and the members simply bargain or work together. In other cases, members actively pool resources, such as stocks and funds in a collective account, with a board with oversees expenditures to make sure that they benefit all the members.

As is the case with any kind of legal partnership, the formation of a consortium requires the effort of a legal team. Lawyers can ensure that the agreement between the members is very clear, with each member understanding the terms of its commitment. They can also help the group with various legal negotiations that may be required in the course of its work.

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Discuss this Article

anon72426
Post 4

what is the difference between consortium and a teaming agreement?

anon39737
Post 2

We are starting a company and we are going to bid one large government project along with good potential company, so we wanted know how it would benefit for us and what are the risks of this. waiting for your good suggestion. Thanks, Aijaz Rahman Khan

kvraju
Post 1

I'd like to know whether a restriction can be imposed that only one party of the Consortium should sign the contract, when the consortium consists of two parties?

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