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Funding Fair 2013 Joint Ventures, Collaborations and Mergers. Andrew Studd Charity and Social Business Team Russell-Cooke LLP 12 July 2013. Context. Current environment Trustee duties and setting the strategy to achieve the objectives Spectrum of collaborative working arrangements.
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Funding Fair 2013Joint Ventures, Collaborations and Mergers Andrew Studd Charity and Social Business Team Russell-Cooke LLP 12 July 2013
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?
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
Structures - Group • Key Benefits • Isolation of risk • Benefit of simplicity • Governance • Issues • Benefits of integration • Confused reporting lines • “independent” trustee board • Unincorporated charities
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 andrew.studd@russell-cooke.co.uk