Shared services for collaborative working
- 1. Collaborative Working & Agreements With Trading Subsidiaries Karen Collins, Senior Associate Wednesday 16th May 2012
- 2. Collaborative Working Overview • Why collaborate? • Legal structure of the collaboration – the options • The first steps – key considerations • Contractual collaborations – Key legal issues
- 3. Why collaborate? “All charities should consider seriously and imaginatively whether there are ways in which they could do more for their beneficiaries by working together” Charity Commission CC34
- 4. Why collaborate? Advantages include: • Reduction in overheads • Sharing of skills • Reduce duplication of effort
- 5. Legal structure – the options • Contractual collaboration • New legal entity
- 6. Legal structure – contractual collaboration • Not a legal partnership • Features of a legal partnership: • no separate legal personality • no limited liability • no set management structure • carrying on business for profit • accounts/tax • assets are partnership property • partners are agent for each other
- 7. Legal structure – contractual collaboration • Colloquial meaning of “partnership working” • 2 or more charities/organisations • Remain separate entities • Specific project/venture • General sharing resources/costs • Detail set out in a contract
- 8. Legal framework – contractual collaboration Key features of contractual collaboration • No separate legal entity • no transfer of assets or employees • contracts must be entered into by one or more participants • Collaboration liabilities are not ring-fenced • Allocation of profit and costs • No set management structure • Cannot raise funds independent of participants
- 9. Legal structure – new legal entity • Replacement entity - merger • Additional entity – joint venture company or limited liability partnership
- 10. Legal structure – new legal entity • Key features of LLP • carrying on business for profit • separate legal entity: can own assets, have employees • members’ liability is limited to capital contributions • flexible management structure • can borrow funds • tax • statutory disclosure and filing requirements
- 11. Legal structure – new legal entity • Limited liability company – by guarantee or shares • Key features • Familiarity • Separate legal entity so can own assets, employees, enter contracts etc • Can borrow funds • Limited liability • Taxed on own profits • Statutory disclosure and filing requirements
- 12. Legal structure – which to choose? • Ability to use relevant structure • Objectives of the collaboration • Relative voting power of each participant • Need to ring-fence the collaboration liabilities
- 13. Working together: the first steps • Understanding • your objectives • your culture • your limitations
- 14. Working together: the first steps Choosing the right partners • The importance of getting it right • The importance of “soft issues” • Politics • Cultural • Policies • Practical implications – redundancies? Compatible IT systems?
- 15. Working together: the first steps • Be open and up front about • Fears • Outcomes • Disputes • Exit strategies • Trust between partners is key
- 16. Contractual collaboration: key legal issues • Who is doing / providing what? • By when? • Management / governance structure • How are costs / liabilities / benefits to be shared? • Disputes • Exit / termination arrangements
- 17. Trading subsidiaries and trading agreements Why have a trading subsidiary? • Charity’s ability to trade is limited • Trading subsidiary is a separate legal entity – ring- fences risk / liability
- 18. Why have a trading agreement? • Impose contractual limitations on what TS can do • Terms on which TS can use charity’s assets • What happens to TS’s profit
- 19. Trading agreement – key issues • Scope of TS’s activities • Use of charity’s name and trade marks • Terms of use of other assets of charity e.g. website, premises, staff, equipment • Records • Gift of TS’s profit to the charity • Termination and effects
- 20. Thank You Cardiff Derby Nottingham
- 21. Contact Details Karen Collins DD : 029 2039 1707 karen.collins@geldards.com