Presentation on theme: "Legal Implications for the Voluntary Sector"— Presentation transcript:
1 Legal Implications for the Voluntary Sector Subcontracting:Legal Implications for the Voluntary SectorFriday 28th February 2014, London Russell-Cooke Solicitors
2 Module 10 Issues in negotiation James Sinclair TaylorThe Charity and Social Business TeamRussell-Cooke Solicitors
3 Issues to consider in negotiations Importance of information gatheringBecoming really familiar with the Government’s position and the framework of this exerciseIdentifying key targets or goals for the service to be providedBe clear about your minimum costs, volumes, service types and client types and defining them clearlyIdentifying risk transfers that you cannot accept and other deal pointsClarify your key arguments
4 Negotiating prior to award of contract to Tier 1 organisation Seek assurances on the work, volume and client type that you will getAgreement about what is an unacceptable payment arrangementSeeking to limit competition?Gaining access to information and in particular their bidClear liaison arrangementsIdentify your arguments and key pointsModel the financial and staffing and premises implications
5 Your strategy if you fail Staff implicationsPremisesOther opportunitiesMergerReview your business strategy
6 Module 1 – Moving from grants to contracts James Sinclair TaylorThe Charity and Social Business TeamRussell-Cooke Solicitors
7 IntroductionIndustry Standard Partnering Agreement is a contract, not a grantISPA is model for a subcontractIt is a framework not a complete documentContract – high risks attached – liabilities widerMay be granted by commercial contractor focused on profit maximizationExpect the contractor to enforce its terms
8 Key Differences between a Grant and a Contract GRANT CONTRACT – and it is a subcontractNot enforceable EnforceableA donation/gift Payment for servicesNo profit/restricted Possible profit/unrestrictedRisk neutral Allocates riskPrinciples Detailed
9 Other Features of a Contract In ISPA many terms need specific tailoringdon’t accept initial “standard” terms of the contractor wholesaledon’t accept objective at odds with your missionContracts must be clearconsider triggers/outcomes needed for payments to be madeservice levels/service credits in IPGA currently blank; must ascertain and understand payment/deduction mechanismsDo you understand exactly what the wording requires you to do?Multiple RequirementsreportingIP rights transferconfidentiality
10 Features of a Contract Compliance Requirements Insurance Step in rightsTerm and terminationExit arrangementsForce majeureAssignment and subcontractors
11 Tax & VAT ImplicationsContracts constitute business income – count towards VAT thresholdDepending on the service VAT rate could be full, zero-rated or it could be exemptContracts for services can mean an organisation should register for VATCharitable – primary purpose trading is exempt from corporation tax. If trading is not directly furthering charity’s objects – it may become subject to corporation taxSeek advice early
12 Liabilities Associated with Grants & Contract Losses/damages are more wide-ranging than a grantContract law principle:in the position he would have been in had the contract been properly performed and had the breach not occurredContract – person suffers a loss:claim for repayment of the feeany other losses they suffere.g. the higher cost of using another provider to perform the servicesIndemnities widen liabilityto include a possible claim for costs and expenses not covered by damagesDispute Resolution provision
13 Module 3 – Governance Implications, Legal Structures and Trustee Risks James Sinclair TaylorThe Charity and Social Business TeamRussell-Cooke Solicitors
14 Your Governance Within your objects? Conflicts of interest created? Missions and values effected?Impact on campaigningViews of your other stakeholdersBoard/staff skills adequateAuthorisation processSpecial monitoring neededBoard member responsibility
15 Managing LiabilityContract through the main organisation or a subsidiaryIssues in using a trading subsidiaryCreating a special purpose vehicleImplications for your controlTrustee and staff liability
16 Contractual Governance Try to keep the reporting workload practicalAgreeing exactly how it is to be done to avoid disputesEnsuring you get prior warning of changes in service level or other changesClarity about who has authorityBuilding relationships of trust
17 Contact Details James Sinclair Taylor Partner 020 8394 6480
18 Module 2 Risk and Mitigation David MearsThe Charity and Social Business TeamRussell-Cooke Solicitors
19 Legal Structure of your Organisation Not appropriate to use unincorporated structure eg trust or unincorporated association – risk of personal liabilityBenefits of using limited liability structure ie company limited by shares/guarantee; CIC; IPS; CIODepending on your existing structure you may want to set up a new limited company to operate the ISPA
20 Risk Assessment Establish process for quantifying and managing risk Cost a range of consequences:Termination after 1 yearNo TUPE transfer of staff on expiryVolume of services half at mid pointDouble volume at mid point“Holistic” approach to risk including strategic riskOperational riskFinancial riskCost mitigation measures and insuranceAn ongoing process during ISPA
21 Financial Risks No guaranteed volume of work Service Levels and Service CreditsInflation/other increases in costs and whether charges can be increasedFull cost recovery including extensive management obligations under ISPACashflow implicationsTax and VAT
22 Specific issues under ISPA Charges ie price payable to youService LevelsService Credits – reduction of charges if work not fully carried out to Service LevelsClause 1.1 (h) - no guarantee of volume of work under ISPA
23 Specific issues under ISPA 1.2 – requirement to meet Service Levels1.4 – changes to Service Levels and Service Credits6.4 – fully considered and assessed riskSubcontracting – permitted under 22 but all risk stays with you
24 The Charity and Social Business Team Russell-Cooke Solicitors Module 7 – Termination, the implications of contract loss and dispute resolutionDavid MearsThe Charity and Social Business TeamRussell-Cooke Solicitors
25 Contract Term and Termination ISPA can be terminated in a number of ways“Initial Term” of three yearsISPA can be terminated voluntarily by either party after the Initial Term on 6 months’ noticeMay need MoJ’s consent to terminate voluntarily if it is a “Material Contract”ISPA will terminate if Services Agreement (Head Contract) terminates for any reasonISPA will terminate if either party becomes insolvent.
26 Material BreachEither party can terminate if the other party is in “material breach” of the ISPA and either:the beach cannot be remedied;the breach has not been remedied within the requisite time frame; orit is a repeated or persistent breach.“Material breach” is not defined in the ISPA - usually a “serious” or “significant” breach – best practice to define.If a material breach occurs- innocent party issues a notice of termination and the ISPA will terminate on expiry of the specified Exit Period.
27 Force Majeure and Relief Events an external event outside of the control of the parties i.e. flooding/ earthquakes etc.must give notice if a Force Majeure Event occurs and take steps to minimise disruption to the servicesSubcontractor will not be paid and Contractor can use another provider.Relief Event:a failure of the Contractor to carry out a “Dependency” (something the Contractor is obliged to do)Subcontractor will not be at fault if it commits a breach as a result of a Relief Event occurringSubcontractor must notify Contractor – compensation for any loss is at Contractor’s discretion and covers “excess” only.
28 Implications of contract loss StaffPremisesService contractsVolunteersDamages
29 Contract changes No limit to amount of changes Contractor can change the service levels- consider impact on cost and resourcesContractor can amend ISPA to reflect changes to Services AgreementSchedule 7 (Change Control) is currently blank and needs to be agreedNo provision for change in contract price- include in Schedule 6 (Charges)Other external factors (i.e. inflation, changes in the law etc).
30 Dispute Resolution Dispute is referred to the Relationship Managers If dispute is not resolved within 10 working daysDispute notice is issued and dispute referred to Chief ExecsIf dispute is not resolved within 10 working daysMediationIf mediation failsAlternative forms of ADR or litigation
31 Module 8 – Data Protection, Confidentiality and Intellectual Property David MearsThe Charity and Social Business TeamRussell-Cooke Solicitors
32 Data Protection- the law Organisations must comply with the DPA 1998 when handling personal dataDPA applies to data about identifiable individuals (data subjects) and can come in a range of forms and materialsAdditional requirements apply to “sensitive personal data”When contracting or undertaking joint activities, it is essential to establish who is the “data controller” and who is the “data processor”Data controller is subject to DPA but will pass down contractual obligations to the data processor
33 Data Protection- under IPSA The Contractor is the data controller and Subcontractor the data processorSubcontractor must only process personal data in accordance with instructions of the Contractor and which is “reasonably required” to be processed in connection with the servicesYou must not disclose personal data to third parties other than employees or subcontractorsContractor can request details of personal data that is processed- need to inform clients of obligation to share dataYour organisation must adopt technical and organisational measures to safeguard personal data
34 Record keepingSubcontractor is obliged to maintain a range of records e.g. overheads, expenditure, performance and payments.Records must also be kept of all staff matters e.g. turnover, pay and disciplinary matters.Any loss or damage to data must be rectified at own cost.The Contractor and MoJ can request sight of all records
35 ConfidentialityParties have a duty not to disclose Confidential InformationConfidential Information is defined as: “information that ought to be considered as confidential (however it is conveyed or on whatever media it is stored) and may include information whose disclosure would, or would be likely to, prejudice the commercial interests of any person, trade secrets, Intellectual Property Rights and know-how of either party and all personal and sensitive personal data within the meaning of the Data Protection Act 1998” (“Confidential Information”)”.Confidential Information may only be used for purposes of providing the services under ISPA.It may be passed to employees or subcontractors on a “need to know” basis only.Both parties are permitted to disclose the terms of the ISPA, but...you must consult with the Contractor before publicising the services.
36 Freedom of Information Freedom of Information Act 2000 (FOIA) provides a right of access to information held by public authoritiesMoJ passes down obligation to provide information in the ISPAYou are required to assist the MoJ in responding to requests and must adhere to the tight time deadlinesTime, cost and resources.
37 Intellectual Property IP includes assets such as names, logos, branding and goodwill, which should be protected when entering into contracts or collaborations.ISPA defines Intellectual Property Rights (IPRs) as all IP whether registered or not e.g. trade marks, copyright and know-how.“Background” IP in existence before ISPA belongs to the original owner.Subcontractor is granted a licence to use the MoJ’s IPSubcontractor must grant a corresponding licence to the Contractor and MoJ to use its IP “to the extent necessary to receive the services”- allows use of any of your IP and includes right to sub-license.
38 Intellectual Property Duty to notify Contractor of any infringement of IPRs or potential claimsSubcontractor indemnifies the Contractor against any financial loss as a result of infringement and vice versaAll materials produced in connection with ISPA (“Project data”) belong to the MoJProject Data is licensed back to you for term of the ISPA, but cannot be used for future projectsProject Data must be stored in the correct wayUnlikely that the Contractor will be willing to negotiate these terms.
39 Contact Details David Mears Partner 020 8394 6484
40 Modules 5 & 6- Employment Law Aspects 28 February 2014Jane Pendry
41 Introduction – the Key Questions What is TUPE?When does TUPE apply?Why do I care if TUPE applies?How do I deal with TUPE in the ISPA?Pensions
42 What is TUPE?Employees follow their work on the same terms and conditionsYou can’t dismiss because of the transferYou treat employees as if they’d always been employed by you - claims and liabilities transferYou have to talk to themYou have to give the new contractor some information
43 When does TUPE apply? Continuation of activities Organised grouping of employeesAssignment
44 Why do I care if TUPE applies? RiskEmployment Tribunal claimsCost implicationsReputational damage
45 How do I deal with TUPE in the ISPA? Impact of employee issues on the wider dealData gathering and preparationNegotiation, warranties and indemnitiesSpecific issues
46 Pensions Pension provisions transfer Exceptions Public-sector schemes Auto-enrolmentExit debt
47 Key Points to Remember Consider TUPE from an early stage Carry out appropriate due diligenceWarranties & indemnitiesDon’t forget about exit provisionsPension issues
49 Module 4 - Mergers and Collaborations The Charity and Social Business TeamRussell-Cooke Solicitors
50 Collaboration - Key Legal Issues Assumption and management of risk – structures and contractsIdentifiable benefits, outputs or cost reductionManagement and decision making - processCommunicationDue diligenceViability and motivation of partnerEmployees, TUPE and PensionsVAT/Tax/AccountingLegal and FinancialCulture?ControlExit
51 Collaboration - Contract CustomerReceipt of servicesPayment to AContractor ADelivery of servicesOther obligationsPayment of feesOther obligationsContractor B
52 Collaboration - Contract Accountable Body and Sub ContractorPrimary responsibility remainsApportion:Service responsibilityPayments, clear and measurable triggersLiability for non performanceRisk of default by subcontractor?
53 Collaboration - New Entity or “SPV” JV EntityMember or Shareholder with right to appoint to boardCharity ACharity BCharity C
55 Merger - Merge into new charity Charity ACharity B
56 Merger - One merges into another Charity ACharity B(+ B)
57 Partner – Charity and Social Business Team Contact DetailsAndrew StuddPartner – Charity and Social Business Team
58 The Charity and Social Business Team Russell-Cooke Solicitors Module 9 – Other Implications including working practices, volunteers, policies and data managementJames Sinclair TaylorThe Charity and Social Business TeamRussell-Cooke Solicitors
59 Working Practices The Services Good Industry Practice Policies Business ContinuityVolunteers
60 Documents and Records Record keeping and data management Audit Information AssurancesISPA Questionnaire
61 Contact Details James Sinclair Taylor Partner 020 8394 6480