© Cleaver Fulton Rankin 2009 Getting Collaboration Right  Legal Issues Jenny Ebbage Cleaver Fulton Rankin, Solicitors 30 M...
© Cleaver Fulton Rankin 2011 <ul><li>Working Collaboratively </li></ul><ul><li>Trust in each other </li></ul><ul><li>Joint...
© Cleaver Fulton Rankin 2011 <ul><li>Working Collaboratively - Issues for Board </li></ul><ul><li>Be clear about the benef...
© Cleaver Fulton Rankin 2011 <ul><li>Working Collaboratively – Legal issues for the Board </li></ul><ul><li>Is the charity...
© Cleaver Fulton Rankin 2011 <ul><li>Working Collaboratively – Structures </li></ul><ul><li>Group structure – formal </li>...
© Cleaver Fulton Rankin 2011 <ul><li>Working Collaboratively -  </li></ul><ul><li>Types of Agreements </li></ul><ul><li>Pr...
© Cleaver Fulton Rankin 2011 <ul><li>What are you getting into? </li></ul><ul><li>Select appropriate type of structure for...
© Cleaver Fulton Rankin 2011
© Cleaver Fulton Rankin 2011 <ul><li>Legal Basics </li></ul><ul><li>Who are the parties? Are they equal? Who has signing a...
© Cleaver Fulton Rankin 2011 <ul><li>Negotiation Process </li></ul><ul><li>What is the shared purpose? What is the aim? </...
© Cleaver Fulton Rankin 2011 <ul><li>Staff & Management  </li></ul><ul><li>Who employs staff? </li></ul><ul><li>Who line m...
© Cleaver Fulton Rankin 2011 <ul><li>Is it a Heads of Agreement? </li></ul><ul><li>Summary and agreement of points to put ...
© Cleaver Fulton Rankin 2011 <ul><li>Key legal elements of a Contract </li></ul><ul><li>Agreement (oral or written) betwee...
© Cleaver Fulton Rankin 2011 <ul><li>Key Terms of contract </li></ul><ul><li>Term/duration – how long? Termination – how a...
© Cleaver Fulton Rankin 2011 <ul><li>Other terms of contract </li></ul><ul><li>IPR –eg copyrighted output material/models ...
© Cleaver Fulton Rankin 2011 <ul><li>Mergers </li></ul><ul><li>merger – 2 or more organisations become 1 </li></ul><ul><li...
© Cleaver Fulton Rankin 2011 <ul><li>Any Potential Deal Breakers? </li></ul><ul><li>Incompatible objects </li></ul><ul><li...
<ul><li>Models </li></ul><ul><li>1. </li></ul><ul><li>New Holding Company –  </li></ul><ul><li>Group Structure </li></ul><...
<ul><li>Models </li></ul><ul><li>2. </li></ul><ul><li>New Charity </li></ul>© Cleaver Fulton Rankin 2011 New Single  Merge...
<ul><li>Models </li></ul><ul><li>3. </li></ul><ul><li>Charity 1 </li></ul><ul><li>Subsidiary of </li></ul><ul><li>Charity ...
<ul><li>Models </li></ul><ul><li>4. </li></ul><ul><li>Transfer  </li></ul><ul><li>of </li></ul><ul><li>Operations </li></u...
<ul><li>Models </li></ul><ul><li>5. </li></ul><ul><li>2 Step </li></ul>© Cleaver Fulton Rankin 2011 Transfers assets emplo...
© Cleaver Fulton Rankin 2011 <ul><li>Getting ready  for a merger </li></ul><ul><li>Is it a secret? </li></ul><ul><li>Confi...
© Cleaver Fulton Rankin 2011 <ul><li>Consider post-merger issues early </li></ul><ul><li>Plan desired outcome at start </l...
© Cleaver Fulton Rankin 2011 <ul><li>Merger:  Legal Process  - 6-9 months </li></ul><ul><li>Confidentiality Agreement – id...
© Cleaver Fulton Rankin 2011 <ul><li>What is legal due diligence? </li></ul><ul><li>A dual purpose legal investigation: </...
© Cleaver Fulton Rankin 2011 <ul><li>Key Areas to Investigate </li></ul><ul><li>Legal capacity </li></ul><ul><li>Employees...
© Cleaver Fulton Rankin 2011 <ul><li>Charities Act (NI) 2008  </li></ul><ul><li>Pt 14 – not in force </li></ul><ul><li>Mer...
<ul><li>For more information </li></ul><ul><li>Jenny Ebbage </li></ul><ul><li> 028 9027 1302 </li></ul><ul><li> [email_a...
© Cleaver Fulton Rankin 2009 © Cleaver Fulton Rankin  2011
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Getting Collaboration Right - Jenny Ebbage

  1. 1. © Cleaver Fulton Rankin 2009 Getting Collaboration Right Legal Issues Jenny Ebbage Cleaver Fulton Rankin, Solicitors 30 March 2011 Please note: the contents of this presentation are for information purposes only and further advices should be sought from a suitably qualified professional adviser before any action is taken. © Cleaver Fulton Rankin 2011
  2. 2. © Cleaver Fulton Rankin 2011 <ul><li>Working Collaboratively </li></ul><ul><li>Trust in each other </li></ul><ul><li>Joint working on a project – formal or informal </li></ul><ul><li>2+ charities/enterprises – best interests of the beneficiaries/users </li></ul><ul><li>To fulfill their purposes </li></ul><ul><li>But remain separate entities </li></ul>
  3. 3. © Cleaver Fulton Rankin 2011 <ul><li>Working Collaboratively - Issues for Board </li></ul><ul><li>Be clear about the benefits for users/beneficiaries </li></ul><ul><li>How will you measure success? </li></ul><ul><li>Who leads and what is role? </li></ul><ul><li>Questions: </li></ul><ul><ul><li>are the organisations and activities compatible or complementary </li></ul></ul><ul><ul><li>who is responsible and liable for what? </li></ul></ul><ul><li>Assess risk against benefit - risk mitigation factors </li></ul><ul><li>What if the other party is in trouble? </li></ul><ul><li>How do you terminate/exit the arrangement? </li></ul>
  4. 4. © Cleaver Fulton Rankin 2011 <ul><li>Working Collaboratively – Legal issues for the Board </li></ul><ul><li>Is the charity acting legally - take professional advice where relevant </li></ul><ul><li>Must act prudently in the interests of the charity </li></ul><ul><li>Does it comply with the governing document/furthering the charitable purpose/objects of the charity? </li></ul><ul><li>Is there power/capacity to undertake it? </li></ul><ul><li>Are the benefits of the collaborative working clear? </li></ul><ul><li>Duty of care to assess the risks and mitigate them </li></ul><ul><li>Retain control of charity property </li></ul>
  5. 5. © Cleaver Fulton Rankin 2011 <ul><li>Working Collaboratively – Structures </li></ul><ul><li>Group structure – formal </li></ul><ul><li>Affiliated structure/federal structure </li></ul><ul><li>Coalition structure – “partnership of equals” </li></ul><ul><li>Separate company, i.e. JV </li></ul><ul><li>Consortium </li></ul>
  6. 6. © Cleaver Fulton Rankin 2011 <ul><li>Working Collaboratively - </li></ul><ul><li>Types of Agreements </li></ul><ul><li>Protocol </li></ul><ul><li>Memorandum of Understanding </li></ul><ul><li>Heads of Agreement </li></ul><ul><li>Contract </li></ul><ul><li>Service Level Agreement </li></ul><ul><li>Consortia Agreement </li></ul><ul><li>Joint Venture Agreement </li></ul><ul><li>Not a “ Partnership ” Agreement? </li></ul>
  7. 7. © Cleaver Fulton Rankin 2011 <ul><li>What are you getting into? </li></ul><ul><li>Select appropriate type of structure for the type of venture </li></ul><ul><li>Set the ground rules – do you understand each other? </li></ul><ul><li>Always work out an exit plan from the start </li></ul><ul><li>What level of legal input is required? </li></ul><ul><li>What sort of agreement is required? </li></ul><ul><li>Careful of accidently creating a “ partnership ” at law – joint & several liability for debts and liabilities </li></ul>
  8. 8. © Cleaver Fulton Rankin 2011
  9. 9. © Cleaver Fulton Rankin 2011 <ul><li>Legal Basics </li></ul><ul><li>Who are the parties? Are they equal? Who has signing authority? </li></ul><ul><li>Legal structure and nature of all the parties </li></ul><ul><ul><li>Charities/social enterprises/CICs/companies ltd by guarantee </li></ul></ul><ul><ul><li>unincorporated/partnership/sole trader </li></ul></ul><ul><li>Due diligence – check out the viability of the other parties </li></ul><ul><li>Is it to be a binding contract or non-binding? </li></ul><ul><li>How much legal input do you need? </li></ul>
  10. 10. © Cleaver Fulton Rankin 2011 <ul><li>Negotiation Process </li></ul><ul><li>What is the shared purpose? What is the aim? </li></ul><ul><li>Can you perform the obligations? </li></ul><ul><li>Are the terms reasonable? </li></ul><ul><li>Mutual agreement on making any changes to obligations </li></ul><ul><li>Are additional documents/information properly incorporated? </li></ul><ul><li>Are obligations ‘flowed down’ from e.g. Letter of Offer </li></ul><ul><li>Does the contract reflect the expectations from the negotiation process? </li></ul><ul><li>Do you need Sub-contractors? – flow down terms to them </li></ul>
  11. 11. © Cleaver Fulton Rankin 2011 <ul><li>Staff & Management </li></ul><ul><li>Who employs staff? </li></ul><ul><li>Who line manages them? </li></ul><ul><li>Division of time/location? </li></ul><ul><li>Any changes to terms & conditions? </li></ul><ul><li>Does TUPE apply? </li></ul>
  12. 12. © Cleaver Fulton Rankin 2011 <ul><li>Is it a Heads of Agreement? </li></ul><ul><li>Summary and agreement of points to put into a contract </li></ul><ul><li>Not usually legally binding </li></ul><ul><li>Should state ‘subject to contract’ and state not legally binding </li></ul><ul><li>Can make some clauses binding, e.g. confidentiality clauses </li></ul>
  13. 13. © Cleaver Fulton Rankin 2011 <ul><li>Key legal elements of a Contract </li></ul><ul><li>Agreement (oral or written) between two or more parties/Made voluntarily/Which can be enforced by the courts </li></ul><ul><li>Parties need ‘capacity’ to enter into it </li></ul><ul><li>Parties must intend it to be legally binding </li></ul><ul><li>Exchange of value between the parties – mutual obligations (promise something and get something in return) </li></ul><ul><li>Obligations must be clear and defined </li></ul><ul><li>Remedies for defaults </li></ul>
  14. 14. © Cleaver Fulton Rankin 2011 <ul><li>Key Terms of contract </li></ul><ul><li>Term/duration – how long? Termination – how and consequences of breach </li></ul><ul><li>Specification of services –milestones </li></ul><ul><li>Obligations – who provides assets/staff/management/who owns them? </li></ul><ul><li>Review mechanisms/Break Clause </li></ul><ul><li>Limitation of liability & Indemnities </li></ul><ul><li>Warranties </li></ul><ul><li>Insurance </li></ul><ul><li>Costs & VAT implications </li></ul><ul><li>Dispute resolution </li></ul>
  15. 15. © Cleaver Fulton Rankin 2011 <ul><li>Other terms of contract </li></ul><ul><li>IPR –eg copyrighted output material/models or charts – who owns it? </li></ul><ul><li>Database created – who owns it? </li></ul><ul><li>Transfers or licenses of IPR? </li></ul><ul><li>Governing law – go for NI law </li></ul><ul><li>Confidential information to be protected? </li></ul><ul><li>Publicity issues? </li></ul><ul><li>Data protection/Freedom of Information? </li></ul><ul><li>Vulnerable people/children – get the clearances </li></ul><ul><li>Third Party Rights – exclude </li></ul>
  16. 16. © Cleaver Fulton Rankin 2011 <ul><li>Mergers </li></ul><ul><li>merger – 2 or more organisations become 1 </li></ul><ul><li>transfer – of charitable undertaking from one or more organisations to one entity </li></ul><ul><li>How will it benefit our beneficiaries/users? </li></ul>
  17. 17. © Cleaver Fulton Rankin 2011 <ul><li>Any Potential Deal Breakers? </li></ul><ul><li>Incompatible objects </li></ul><ul><li>Restricted reserves </li></ul><ul><li>Pension scheme deficits </li></ul><ul><li>Culture clash </li></ul><ul><li>No true business case for merger </li></ul><ul><li>Name and identity of merged entity </li></ul><ul><li>Lack of support from members/groups </li></ul><ul><li>Governance - composition of merged charity board </li></ul><ul><li>Chair </li></ul>
  18. 18. <ul><li>Models </li></ul><ul><li>1. </li></ul><ul><li>New Holding Company – </li></ul><ul><li>Group Structure </li></ul><ul><li>result: </li></ul>© Cleaver Fulton Rankin 2011 New Company Charity 1 Charity 2 <ul><li>Parent </li></ul><ul><li>i.e. sole member of </li></ul><ul><li>charity 1 & charity 2 </li></ul>Subsidiaries
  19. 19. <ul><li>Models </li></ul><ul><li>2. </li></ul><ul><li>New Charity </li></ul>© Cleaver Fulton Rankin 2011 New Single Merged Charity Charity 1 Charity 2 Dissolves Dissolves Transfers assets employees operations
  20. 20. <ul><li>Models </li></ul><ul><li>3. </li></ul><ul><li>Charity 1 </li></ul><ul><li>Subsidiary of </li></ul><ul><li>Charity 2 </li></ul><ul><li> result: </li></ul>© Cleaver Fulton Rankin 2011 Charity 2 Charity 1 Parent Subsidiary
  21. 21. <ul><li>Models </li></ul><ul><li>4. </li></ul><ul><li>Transfer </li></ul><ul><li>of </li></ul><ul><li>Operations </li></ul><ul><li>result: </li></ul>© Cleaver Fulton Rankin 2011 Enlarged Body Charity 1 Charity 2 Charity 1 Charity 2 Transfers assets employees operations shell & will dissolve
  22. 22. <ul><li>Models </li></ul><ul><li>5. </li></ul><ul><li>2 Step </li></ul>© Cleaver Fulton Rankin 2011 Transfers assets employees operations Charity 1 Charity 2 Step 1 Charity 1 Step 2 Charity 2 Result Charity 2 Charity 1 parent subsidiary (shell co) (legacies?)
  23. 23. © Cleaver Fulton Rankin 2011 <ul><li>Getting ready for a merger </li></ul><ul><li>Is it a secret? </li></ul><ul><li>Confidentiality Agreement </li></ul><ul><li>Exclusivity and lock-out period </li></ul><ul><li>Impact on the charity – people/time/CEO role </li></ul><ul><li>Leadership – Trustees/CEO/senior management team </li></ul><ul><li>Each charity needs a Project Manager </li></ul><ul><li>Information/communication/negotiation </li></ul><ul><li>Proportionate “vetting” of other parties – due diligence </li></ul><ul><li>Plan the timetable and work </li></ul>
  24. 24. © Cleaver Fulton Rankin 2011 <ul><li>Consider post-merger issues early </li></ul><ul><li>Plan desired outcome at start </li></ul><ul><li>Set a transfer/merger date </li></ul><ul><li>Public perception of combined organisation </li></ul><ul><li>Branding of merged charity </li></ul><ul><li>People – staff, volunteers, beneficiaries, board members/trustees </li></ul><ul><li>Funders </li></ul><ul><li>Cost of transfer/merger </li></ul>
  25. 25. © Cleaver Fulton Rankin 2011 <ul><li>Merger: Legal Process - 6-9 months </li></ul><ul><li>Confidentiality Agreement – identify deal breakers </li></ul><ul><li>All parties Heads of Agreement/Letter of Intent with lock-out period </li></ul><ul><li>Legal Due Diligence Questionnaire and Reports – on each charity and exchange with each other </li></ul><ul><li>Transfer of Charitable Undertakings Agreement </li></ul><ul><li>Property Transfer Deeds </li></ul><ul><li>Ancillary Documentation </li></ul><ul><ul><li>Board Minutes </li></ul></ul><ul><ul><li>Resolutions </li></ul></ul><ul><li>Regulator approvals – HMRC/CCNI/funder approvals/Dept approvals </li></ul><ul><li>Completion on target date </li></ul>
  26. 26. © Cleaver Fulton Rankin 2011 <ul><li>What is legal due diligence? </li></ul><ul><li>A dual purpose legal investigation: </li></ul><ul><li>to assess the viability of a potential collaboration or merger </li></ul><ul><li>to identify legal issues </li></ul><ul><li>to assist in the integration of the charities after the merger is “completed”. </li></ul>
  27. 27. © Cleaver Fulton Rankin 2011 <ul><li>Key Areas to Investigate </li></ul><ul><li>Legal capacity </li></ul><ul><li>Employees and volunteers/TUPE </li></ul><ul><li>Assets and liabilities </li></ul><ul><li>Contracts </li></ul><ul><li>Premises and properties </li></ul><ul><li>IPR </li></ul><ul><li>Financial </li></ul><ul><li>Pensions </li></ul>
  28. 28. © Cleaver Fulton Rankin 2011 <ul><li>Charities Act (NI) 2008 </li></ul><ul><li>Pt 14 – not in force </li></ul><ul><li>Merger provisions </li></ul><ul><li>Transfer of gifts </li></ul><ul><li>Registration of mergers </li></ul>
  29. 29. <ul><li>For more information </li></ul><ul><li>Jenny Ebbage </li></ul><ul><li> 028 9027 1302 </li></ul><ul><li> [email_address] </li></ul><ul><li>www.cfrlaw.co.uk </li></ul>© Cleaver Fulton Rankin 2011
  30. 30. © Cleaver Fulton Rankin 2009 © Cleaver Fulton Rankin 2011

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