Exit Strategies

1. Exit Strategies Alex Peel Bradford CVS

2. Today’s session • What are exit strategies and why have one? • What issues do we need to consider when looking at exits? • How do we support organisations to think about exit strategies? • Our training/information needs?

3. What are exit strategies? ‘You can not know how you should start a project if you do not know how to close it.’ Anon American Business Guru ‘A plan for what will happen when this funding ends – either by winding down the project in a planned way, or earning income from charges, or finding new funding sources.’ Fit for Funding

4. And for businesses • A well thought-out exit strategy can help you to maximise the value you get from your business, successfully market your business to potential buyers or investors and ensure you end your involvement with as little disruption to the business as possible. • Regardless of whether your exit occurs to a planned schedule or you are forced to make a move for unexpected reasons, the decisions you make when setting up can affect how easy it is for you to eventually exit your business. • Business Link website

5. Why have an exit strategy? • Why bother – isn’t wait and see what happens enough of an option?

6. What should be included?

7. What should be included • Project options Fixed term project which ends when funding ends – how is this managed Specific money injection – build or develop tool/resource Project continues with further grant support Continues by being contracted to deliver a service or selling a product Continue through using funds raised by donations or subscriptions

8. What should be included? • Organisation Options • Survival • Dormancy/Hibernate • Merge/Partnerships • Wind Up

9. Survival • Clear Aims and Objectives, Values and Mission • Planning Ahead • Regular Reviews • Build up Reserves • Good Financial Management • Avoid Reliance on One Funder

10. Dormancy Resolution at meeting and Auditors Reporting to Companies House- returns. Reporting to Charity Commission Reporting to members Following the Governing document Striking off - 2 strikes

11. Merge • Powers Allowed by Governance documents? • Merge to create new body? Aims of that body compatible • Time to do Due Diligence Exercise -proposed partners demonstrate financial/legal/strategic position • Due Diligence –in house/advisers/auditors • Partnership issues / relationships? • Staff issues -employing body/contracts. • Register of Mergers Charity Commission

12. Drivers for merger (in theory) Internal desire to provide more/ better services to beneficiaries Internal increase efficiency through better use of resources Internal prevent duplication of services Internal financial difficulties Internal raise profile and/ or boost income Internal loss of key staff/ trustees Internal “survival & rescue” – organisation in jeopardy merges with another with similar objectives, so services continue External pressure from funders to reduce duplication External government encouragement External competition with similar organisations External stakeholder opinion External public perception of overcrowded voluntary service ( Source: NCVO)

13. Drivers in practice 1 We want to reach funding we can’t reach on our own – consortium 2 We might have to call it a day – [rescue] merger (Thanks to Richard Spencer from the WY Partnerships project for this slide)

14. Winding Up ..is the process of • Ceasing to operate • Stopping activities and services • Dismissing staff • Closing premises • Paying bills • Terminating contracts • Dealing with liabilities • Distributing any remaining assets

15. Liquidation Is a formal process governed by the Insolvency Act • Involves selling or disposing of the assets of an organisation and dealing with liabilities • Can occur if the organisation is solvent or insolvent • Compulsory or voluntary

16. Tests for Insolvency • Cashflow (going concern)test – can the organisation pay debts as they fall due and can do so for the foreseeable future • Balance Sheet test – are total assets more than total liabilities (including current, contingent and propsective liabilities)

17. Dissolution • Is the final stage in ending the organisation • Unincorporated orgs can dissolve themselves in accordance with governing document • Incorporated orgs cease to exist when they are removed from the relevant register

18. Precautionary Notice • An organisation approaching the end of a contract or funding cycle without knowing whether there will be replacement funding may need to undertake a redundancy consultation and give employees notice of redundancy – this is called a precautionary (or protective) notice of redundancy

19. Issues in winding up • Checklist from Legal Handbook

20. Winding Up Unincorporated Organisations • Set down in Constitution/good practice ? • Resolution at general meeting /notice period • Transfer remaining assets to comparable organisations/purpose • Who has powers to act -agree these beforehand –record • Using up and spending grants /donations • Creation and submission of final accounts • Liability of debts – remains with committee/ and former members.

21. Winding Up A Solvent Company • Apply for Voluntary striking • Not operated/trading for 3 months previously (except for disposing of assets) • Special resolution at general meeting/begins liquidation/companies house • Notification of closure /whom? • Activities cease except for winding up process • Members Voluntary Winding Up • Members (majority) make formal declaration of solvency/date statement of assets and liabilities. • Pay all debts within in 12 months • Winding up begins with resolution/general meeting/no trading after. • Appointment of liquidator/manages process. • Informing Companies House.

22. Winding Up - Charity • Special general meeting agree dissolution • Charge officers with clearing debts and agree degree of initiative of officers. • Inform Charity Commission (online form) • Final report nil balance

23. Winding Up Insolvent Companies • Company Voluntary Agreement • Directors make proposal to members/creditors to satisfy debts • Insolvency practitioner appointed and manages process • Charity • Set of accounts to CC • As above but if not able to act ( lack of quorum/trustees= C.C consulted) • Creditor’s Voluntary winding Up. • Company members pass extraordinary resolution to wind up • Creditor’s meeting – present statement of company affairs/appoint a liquidator who manages process

24. Supporting organisations? Why is it difficult to think about exit strategies and winding up? How can we broach the subject/support organisations?

25. What do they think? • Funders • Partners/other organisations • Staff • Members • Users/Beneficiaries • Public

26. Emergency Support • Expert • Pair of hands • Facilitator • Set expectations • Provide support • Move on NCVO: Supporting 3rd Sector Organisations in Crisis

27. Supporting Groups Encourage them to SET GROUND RULES Avoid infighting and blame. Work Together. Keep information flowing Set clear goals. Prioritise. Who does what?

28. Supporting Groups Encourage them to KEEP CALM Follow the governance and legal stuff Try to plan ahead Record what you do Prioritise Don’t Panic!

29. Sources of information • DTA Early Warning Guide • Charity Commission publications • Companies House publications • NCVO Supporting Groups in Crisis • PERS/WYCAS/ACAS • ???

30. Our training/information needs