1. Managing the preparation for collaboration Presentation by Judith Harrison FCCA Manager Professional Services Voluntary Action Sheffield

2. Starting Off Chatham House Rules We are charities My experience

3. What do VAS does Professional Services; Payroll, CAS, Legal, HR and EDC Training IT, inc VCConnect Circle Building This allowed us to deliver “joined up support”

4. Collaboration Why? For charities the objects of the charity & hence the Beneficiaries’ interests must come first

5. What format can this take? Informal collaboration Consortia Sharing ownership of a delivery organisation, e.g. a trading arm Full blown merger

6. Merger options When “A” and “B” want to merge Take overOption 1Transfer of assets“A” receives assets of “B” MergerOption 2Transfer of assetsAssets of both “A” & “B” are transferred to a new organisation Take overOption 3Transfer of ownership Organisation “A” becomes sole trustee of “B”

7. Option 1 Pros Avoids cost of forming of new organisation Retains reputation/good will Could “re-name” remaining organisation to minimise perception that they have “taken-over” the other organisations.

8. Option 1 Cons Trustees need to be certain that the particular needs of their beneficiaries can still be met. The recipient organisation is perceived to “take over” which may not be acceptable to boards of merging organisations May have to alter articles of mergees to allow transfer of assets Existing Contracts (held in name of organisations which are “taken-over”) may not allow novation to the new organisation TUPE will apply S75 Pension liabilities may arise

9. Option 2 Pros There is not a recipient organisation, which could be perceived to “take over” this may be more acceptable to boards of merging organisations

10. Option 2 Cons Trustees need to be certain that the particular needs of their beneficiaries can still be met. Costs of formation of new organisation Need to form a new organisation with a new name so loss of reputation/good-will, may have to build new relationship with funders May have to alter articles of mergees to allow transfer of assets – can approach Charity Commission to allow this to happen Existing Contracts may not allow novation to the new organisation TUPE still likely to apply S75 Pension liabilities may arise

11. Option 3 Pro Minimal organisational change needed S75 Pension liabilities will not arise

12. Option3 Cons May be seen as a “take-over”

13. Preliminary steps Determine why Build trust Commit to the outcome

14. Process Need to consult the Charity Commission’s guidance see; “Making mergers work: helping you succeed” Due Diligence needs to cover; Legal Financial HR Operational

15. Carried out by? Professional Advisors or trustees/staff Legal Financial HR Operational

16. Where to start? We start by doing an initial legal check to ensure; –Objects are compatible –Organisations have Power to dissolve Can transfer assets If not need to have EGM/Apply to charity Commission

17. Other legal issues Novation of Contracts

18. Financial Due Diligence Back-wards look –Valuing assets and liabilities of a merger partner at a specific date, but on what basis? E.g. Should redundancy costs be included “Concept of “Crystallisation” of assets Forward look –Liquidity of the charity’s operations going forward

19. Pensions What is a S75 liability?

20. Timing A merger process often has to work to an specific merger date Remember EGM usually require 28 days notice for members Then the dissolution notice needs to be filed with companies House & this may take up to 14 days.