andrew studd charity and social business team russell-cooke llp 12 july 2013 funding fair 2013 joint...
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Andrew Studd
Charity and Social Business Team
Russell-Cooke LLP
12 July 2013
Funding Fair 2013
Joint Ventures, Collaborations and Mergers
Context
Current environment Trustee duties and setting the strategy to achieve the
objectives Spectrum of collaborative working arrangements
Drivers
Wider geographic spread / scale / reach Better / more efficient service delivery Reduce overheads / loss of income / cost savings Future funding uncertainty Brand and cost of fundraising Louder “voice” in campaigning Move from grants to contracts Funders requiring partnership working Governance Staff retention / skills Crisis?
Business Themes
Who is your partner? Common objectives / goals What do they want from you? Trust, culture and personalities Reputation Funding Communications and planning Contracts
Authority
Memorandum and articles/trust deed/rules* Objects Powers Trading or fundraising? Primary purpose Appropriate use of resources Private benefit
Trustees Commercial partnerships policy Reputation management Charity Commission guidance
*note own structure and impact on liability
Collaboration: Contractual Joint Venture
Degree of integration Sharing/apportioning of risk MOU? Legally binding or not?
Accountable Body and Sub Contractor Primary responsibility remains Apportion service responsibility Risk of default by subcontractor?
Collaboration: Joint Venture SPV
New Entity
“Corporate” joint venture or “SPV” Limited liability for members or shareholders Governance issues Business rates Costs sharing, VAT and grouping – cost sharing
exemption Capital provision Board appointment and other controls
Key Legal Issues Assumption and management of risk – structures and
contracts Identifiable benefits, outputs or cost reduction Management and decision making - process Communication Due diligence
Viability of partner Employees and TUPE VAT/Tax/Accounting Legal and Financial Culture?
Control Exit
Merger – Structures
Overlapping board membership strategic partnership but potential conflicts of interest
Group structure Parent /subsidiary
Full merger One into another New organisation
Other options – function swap
Group Structure**assumes corporate structure
Structures - Group
Key Benefits Isolation of risk Benefit of simplicity Governance
Issues Benefits of integration Confused reporting lines “independent” trustee board
Unincorporated charities
Merge into new charity
One merges into another
Structures – Full Merger
Benefits Full integration? Branding Competitive environment
Issues More extensive due diligence Cost Legal issues
Pensions TUPE Leases
Combination
Group structure followed by full merger or “hive up” Control Timing Flexibility “Independent” trustee board and managing conflicts of
interest
Due Diligence
Asset risks Consents? Landlords and other third parties
Income risks Contracts Consent of funders
New funders Old funders – clawback
Past risks Reputational risks
Data protection Regulatory risks
Due Diligence – Staff Issues
TUPE Varying the employment contract Compromise agreements Pensions Union recognition and national terms Self-employed, casuals and volunteers
Transfer Agreement
Transfer of Assets Warranties Indemnities Intellectual property Land Assignment/Novation of contracts
Risk Management
Deal breakers Due diligence is key Confidentiality agreement Heads of terms/MOU Role of structure
Acts as a firewall Role of the transfer agreement
Transfer of assets Warranties Indemnities
Post Merger
Just the beginning…. Integration and implementation
Mission protection Retention, wind-up or strike off Register of mergers Insurance and claims Ring fencing and restricted funds
Checklist
The starting point: inspiration, not desperation! Be clear about the risks, and benefits you are
seeking Working in the spirit of partnership is key Effective leadership is essential People are the most important consideration Process management is complex and time
consuming Independent facilitation can be highly cost-
effective
Contact Details
Andrew Studd
Partner – Charity and Social Business Team
020 8394 6414