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Funding Fair 2013 Joint Ventures, Collaborations and Mergers

Join Andrew Studd and the Charity and Social Business Team from Russell-Cooke LLP on July 12, 2013, to learn about the current environment, trustee duties, and strategies for achieving objectives through joint ventures, collaborations, and mergers. Explore the key legal issues, risk management, due diligence, and post-merger considerations. Contact Andrew Studd at andrew.studd@russell-cooke.co.uk or 020.8394.6414 for more information.

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Funding Fair 2013 Joint Ventures, Collaborations and Mergers

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

  2. Context • Current environment • Trustee duties and setting the strategy to achieve the objectives • Spectrum of collaborative working arrangements

  3. 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?

  4. 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

  5. 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

  6. 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?

  7. Collaboration: Joint Venture SPV

  8. 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

  9. 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

  10. 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

  11. Group Structure**assumes corporate structure

  12. Structures - Group • Key Benefits • Isolation of risk • Benefit of simplicity • Governance • Issues • Benefits of integration • Confused reporting lines • “independent” trustee board • Unincorporated charities

  13. Merge into new charity

  14. One merges into another

  15. Structures – Full Merger • Benefits • Full integration? • Branding • Competitive environment • Issues • More extensive due diligence • Cost • Legal issues • Pensions • TUPE • Leases

  16. Combination • Group structure followed by full merger or “hive up” • Control • Timing • Flexibility • “Independent” trustee board and managing conflicts of interest

  17. 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

  18. Due Diligence – Staff Issues • TUPE • Varying the employment contract • Compromise agreements • Pensions • Union recognition and national terms • Self-employed, casuals and volunteers

  19. Transfer Agreement • Transfer of Assets • Warranties • Indemnities • Intellectual property • Land • Assignment/Novation of contracts

  20. 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

  21. 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

  22. 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

  23. Contact Details Andrew Studd Partner – Charity and Social Business Team 020 8394 6414 andrew.studd@russell-cooke.co.uk

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