1. 35647679_1 1 Height 5.9 Width 5.9 Horiz 18.5 Vert 4.5 Height 2.9 Width 2.9 Horiz 15.5 Vert 7.5 Height 2.9 Width 2.9 Horiz 18.5 Vert 10.5 Height 1.5 Width 1.5 Horiz 21.5 Vert 10.5 Governance in a Multi – Organisation Special Purpose Vehicle Heather Watson Partner 25 July 2015

2. 35647679_1 2 What is a Multi-Organisation Special Purpose Vehicle? ■ Separate entity – usually a separate legal entity ■ Established for a particular purpose or enterprise ■ Can be wholly controlled by one entity or by several ■ May have a different legal and tax structure to the controlling entity or entities

3. 35647679_1 3 Why establish a special purpose vehicle? ■ Improved operational capacity ■ Specialist activity that warrants specialist skills and governance oversight ■ Separation of risk from controlling entity ■ Requirement of government funded procurement conditions ■ Different tax structure is required so as not to put at risk the tax concession status of the controlling entity

4. 35647679_1 4 For profit or Non profit structure? ■ For profit model works if primary purpose is to derive a profit, and distribute franked dividends to its shareholder(s) ■ Subject to timing issue, a tax concession shareholder will be eligible for a refund of franking credits ■ If shareholders are both tax paying and tax exempt entities, there will be a fundamental mismatch on distribution strategy ■ Recent judicial decisions, and ACNC commentary provides increased opportunity to use non profit models, even where deriving a surplus from activity is intended

5. 35647679_1 5 Governance issues for single controlling entity ■ How is the board constructed and who has control over board appointments? ■ How can mission, culture and values of the controlling entity be guaranteed for the SPV? ■ How are reporting obligations determined - both internally and externally? ■ When does the structure allow for consolidated financial and regulatory reporting? ■ How is accountability determined?

6. 35647679_1 6 Governance issues for multi party controlling entities ■ Same issues as for single controlling entities, with slightly different considerations □ how are the interests of each controlling member represented in the SPV decision making? □ is there a conflict between the best interest of the SPV and the interests of the controlling entities? □ how do the controlling entities engage with each other in the context of the SPV? □ how are decisions amongst the controlling entities made? □ how are those arrangements typically documented?

7. 35647679_1 7 Concept of Reserved Powers ■ How are they framed in the context of companies limited by guarantee? ■ Are they available for other corporate structures? ■ What is the process for developing the powers and revising them over time? ■ What are the tensions to be balanced?

8. 35647679_1 8 Case Study

9. 35647679_1 9 Contact Heather Watson Partner T+61 7 3233 8820 Ehwatson@mccullough.com.au Disclaimer: This presentation covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. This presentation is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this presentation.