Andrew Studd Charity and Social Business Team Russell-Cooke LLP 12 July 2013 Funding Fair 2013 Joint Ventures, Collaborations and Mergers.

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

[email protected]