Charity Mergers & Collaborative Working
Charity Mergers & Collaborative Working
Charities are increasingly considering innovative approaches to collaborative working and mergers. We are here to help you navigate the various legal issues involved.
A charity may wish to consider joining forces with another charity for a variety of reasons. These may be:
- service orientated – designed to secure a greater impact in a charity’s work and to reach an increased number of potential beneficiaries, or
- driven by internal factors, such as the need to find cost savings through sharing resources, or to meet the challenge of recruiting a sufficient number of trustees with appropriate skills.
Collaborating with another charity may provide a suitable solution either short term (for a particular project, for example) or even longer term (to share support services or accommodation, perhaps) where each charity wishes to retain their respective independence. Collaboration can, however, be a point in the journey towards a full merger – even where this is not anticipated by the charities at the outset.
Our Charities Team lawyers have significant experience in helping charities navigate their way through the points they need to consider when exploring, negotiating, and then implementing, a collaboration or merger with another charity. Our approach is designed to be reflective of the collaborative nature of these arrangements, and the ultimate goal of bringing together two charities to become greater than the sum of their parts.
We recognise the critical role that we have in facilitating this, whilst also ensuring that our charity clients are appropriately advised and that the charity trustees have all of the information they require to make a decision on whether to approve the merger in the best interests of their charity. We understand the importance of the decision-making process, and we have considerable experience providing pragmatic and helpful advice and guidance on how to approach significant, strategic decisions to ensure compliance with legal duties in line with Charity Commission expectations of charity trustees.
We can help charity trustees with the identification of the legal and commercial issues (including those identified in the Charity Commission’s checklist for mergers) and ensure that they follow a proper process throughout. Our services include:
- considering the compatibility of the respective charities’ objects and ensuring the charity trustees work within their powers
- advising on and supporting appropriate levels of due diligence on the proposed “partner” charity
- addressing the need for contractual certainty, suitable oversight and decision-making protocols, and adequate protections for both charities
- advising on the creation of a separate joint venture vehicle to ring-fence the project
- advising on dealing with the ownership of any assets created during the collaboration (such as intellectual property) and how it might be shared once the collaboration is at an end
- addressing the charities’ respective responsibilities for costs and liabilities incurred – particularly where one charity acts as the “project lead” for the other
- advising on employee issues (for example, where secondments may be used)
- advising on how to deal with any constraints on exploring relationships with other charities during the collaboration (if required)
- advising on legal and regulatory compliance, assisting with securing necessary third party consents (if assets are to be shared) and confidentiality obligations regarding the arrangements
- advising on how to bring the collaboration to an orderly conclusion and how the benefits of the collaboration (new skills, additional opportunities) might be secured.
- considering the compatibility of the respective charities’ objects and the powers by which the merger may be achieved
- identifying the most suitable means to achieve merger, whether by:
- one charity transferring all of its assets and liabilities to another
- both charities transferring all their assets and liabilities to a newly established charity; or
- through a “change of control” of one charity (so that it becomes the effective “subsidiary” of the other).
- advising on legal and regulatory compliance, assisting with securing any appropriate consents from the Charity Commission, assisting with securing necessary third party consents and advising on confidentiality obligations regarding the arrangements
- assisting with consultations with stakeholders and beneficiaries
- advising on all appropriate resolutions required to effect the merger and any conflicts or “connected persons” issued
- advising on and carrying out appropriate levels of due diligence on the other charity, its assets and liabilities and identifying of any constraints on achieving the merger (such as prohibitions on the assignment of property leases, grant funding or contracts and the terms of any bank facilities or loan agreements) and considering how best these constraints may be overcome
- assessing and advising on the particular issues presented by the existence of any permanent endowment and how these might be addressed
- advising on and assisting with employee transfers under TUPE
- ensuring that the merger is properly documented in a comprehensive transfer agreement, coupled (where appropriate) with a vesting declaration and any necessary ancillary documents
- seeking to mitigate against the risk of loss of legacy income by registering the merger with the Charity Commission
- advising on the dissolution of the charity that has divested itself of its assets on merger.
For top tips on charity mergers and collaborative working, you might be interested in our free webinar on this topic, which is available on our Birketts YouTube channel, along with various other free webinars on a range of topics for our charity sector clients.