Wales Charity Law Conference 2015

1. Wales Charity Law Conference
2015
Working together – tips for preparing the
perfect consortium agreement
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2. Working as part of a consortium
• Growth of collaborations and consortia working
• Aims of this session
• Importance of understanding your options
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3. Why get involved?
• Better chance of winning funding/contract
• Told to collaborate
• Streamline services or reduce costs
• Share risks of your new venture
• Increase reach of your services
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4. What’s in a name?
• Definition of “collaborate”
• Definition of “consortium”
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5. First tip: pick the correct structure
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6. Three main consortium structures
• The “corporate” model
• The “contractual” model
• The “administrative” model
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7. Corporate model
• Formal model
• Potentially expensive model
• Ring-fencing of liability
• Increasing trend?
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8. Limited Liability Partnership
• Hybrid structure
• Profit seeking ventures
• Separate legal personality
• Member liability limited to capital contribution
• Flexible management structure
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9. Limited Liability Partnership
• Borrowing funds
• Member’s interests cannot be transferred
• Transparent for tax purposes
• Disclosure and filing requirements
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10. Limited liability company
• Two types:
oCompany limited by shares
oCompany limited by guarantee
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11. Company limited by shares
• Best known structure
• Separate legal personality
• Borrowing funds
• Member liability limited to share capital
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12. Company limited by shares
• Shares can be transferred
• Company taxed on its own profits
• Disclosure and filing requirements
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13. Company limited by guarantee
• As per previous slide but:
o Member liability typically limited to nominal £1
o Membership not usually transferable
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14. Community Interest Company
• Ventures designed to benefit the community
• Company limited by guarantee or by shares
• Strict limits regarding distribution of assets
• So why is it useful?
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15. Partnerships
• Formal vs informal
• No separate legal personality
• Liabilities not ring-fenced
• No set management structure
• Profit seeking ventures
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16. Partnerships
• Own accounts but tax transparent
• Assets committed to the venture
• Each partner an agent for the others
• Interest not transferable
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17. Limited partnership
• Not to be confused with LLP
• Features largely as per formal partnership
• Limited liability for non-active partners
• One active partner to have unlimited liability
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18. Charitable Incorporated Organisation
• New(ish) legal form
• A structure specifically designed for charities
• There are advantages and disadvantages

19. Charitable Incorporated Organisation
• Separate legal personality
• Can own assets
• Can enter into contracts
• Can employ employees
• Liability of trustees is generally limited but:
• Breach of trust and wrongful/fraudulent trading
• Activities restricted to its charitable objects

20. Charitable Incorporated Organisation
• Registered with the Charity Commission
• No dual registration with Companies House
• Timing issues re setting up – 40 working days
• No minimum registration threshold
• No fees to charity commission to set up

21. Charitable Incorporated Organisation
• Charitable tax relief – primary purpose trading
• Raising funds:
• Registration of charges over land at Land Registry
• No registration of charges at Companies House
• No registration of charges at Charity Commission
• Lack of security means potential issues for funders

22. Charitable Incorporated Organisation
• Foundation CIOs:
- “closed” membership - members and
trustees are the same
• Association CIOs:
- “open” membership – members do not
have to be trustees
• Generally not as flexible as a limited company

23. Community Benefit Society
• Overarching community purpose
• Special reason for being a CBS is needed
• Separate legal personality:
• Can own assets
• Can enter into contracts
• Can employ employees

24. Community Benefit Society
• More expensive to set up
• Cannot distribute surpluses to members in the
form of dividends
• Option to have a statutory asset lock
• No need to register with Charity Commission
• Regulated by the FCA

25. The contractual model
• Two or more charities
• Remaining separate legal entities
• Working together on specific project(s)
• Sharing or pooling resources and costs
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26. The contractual model
• One or more contracts, setting out:
o roles
o rights
o responsibilities
• Simplest form of structure
• Long-term framework vs one-off contract
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27. The contractual model
• No legal personality
• Liabilities not ring-fenced
• Participants not necessarily liable for others
• No transfer of assets to consortium
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28. The contractual model
• Participants bear own costs (and keep profits)
• Consortium cannot itself raise funds
• No set management structure
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29. Which option to chose?
• Powers to participate in different vehicles
• Objectives
• Duration
• Level of contribution
• Level of risk
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30. Second tip: understand the risks and
challenges involved in consortia
working

31. The risks and challenges
• Understand your own culture
• Understand your own limitations
• What is your willingness to collaborate?
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32. The risks and challenges
• Choosing the right participants: soft issues
o Politics
o Culture
o Policies
o Systems
o Shared vision
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33. The risks and challenges
• Choosing the right participants: be open:
o Fears
o Outcomes
o Disputes
o Exit strategies
• Trust between participants is key
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34. The risks and challenges
• Choosing the right participants: assessing
financial or reputational risk:
o Level of detail depends on risk
o Costs – proper use of funds
o Costs – forecast at outset
o Due diligence checklist
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35. The risks and challenges
• Charity law considerations:
o Maintaining decision-making independence
o Transparent and accountable governance
o Risks vs possible benefits
o Effective use of charity’s resources?
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36. The risks and challenges
• Reputational risks:
o Importance of due diligence
o Strong governance structures
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37. Third tip: ensure your consortium
agreement addresses the key issues

38. Key terms in your consortium
agreement
• Purposes of the agreement
• The bid form
• Business plan/statement of work
• Roles, responsibilities and general obligations
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39. Key terms in your consortium
agreement
• No formal partnership or agency
• Financial arrangements
• Materials and intellectual property
• Information obligations
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40. Key terms in your consortium
agreement
• Management of the project/services
• Indemnities and caps on liability
• Employment provisions
• Termination and consequences
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41. Key terms in your consortium
agreement
• Assignment and sub-contracting
• Force majeure events
• Boilerplates
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42. Fourth tip: check you have all the
ingredients for a successful
consortium

43. The ingredients for a successful
consortium
• Analysis of preparedness for collaboration
• Suitable form for collaboration
• An agreement dealing with the key issues
• Patience and perspective
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44. Photos for external presentations
Owen Evans
DD : 029 2039 1850
Mobile:
owen.evans@geldards.com
www.geldards.com

45. Thank You