Charity mergers: the real issues you need to consider
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Transcript of Charity mergers: the real issues you need to consider
Charity Mergers:The real issues you need to consider
Martyn DaviesSenior Associate, Geldards LLP
Charity Mergers:• Merger options• Trustee Considerations • Practicalities• Due Diligence• Documentation to expect
What do we mean by “Merger”?• Two or more separate organisations coming
together to form one legal entity – usually- A new charity formed to take on the assets and
liabilities of the original charities or- One of the existing charities takes on the assets
and liabilities of the other charity(ies)
Which option to choose?• Depends on legal structures involved• Bargaining position of the parties involved• Any specific issues (legal or otherwise) which
need to be accommodated
Which option to choose?Option 1• New corporate body established to be recipient
Advantages• Perception of parties (not a “takeover”) • Clean start, equality of parties
Disadvantages• (Possibly) costs of creation of new body• Consents to transfer assets to new organisation
Which option to choose?Option 2• Existing organisation acts as recipient
Advantages• No costs of creation of new body (but may be costs
of amendments to recipient governing document, name etc)
• Recipient won’t need to transfer its assets Disadvantages
• Can be perceived to be “takeover”
ConsiderationsInitial Questions for Trustees • Is a merger in the best interests of the charity• What are the likely benefits/risks• Are the charities compatible in terms of
objects, vision, culture and values etc• What are the views of the key
funders/beneficiaries of the charity – will they support it
Initial Questions for Trustees • What are the likely costs to achieve the
merger, consider time commitments of staff/trustees as well as financial (professional fees/rebranding etc)
• Will any consents be required to allow the merger to happen, are these likely to be given
Considerations
• Establish legal status of each party (company, trust, unincorporated association);
• Check “objects” of each• Are “activities” compatible and in furtherance
of objects?• What will transfer, for example are there any
permanent endowment /special trusts or large liabilities
Considerations
Practicalities• Check governing documents, is there:
- Power to merge or- Power to transfer or- Dissolution clause which can be used to facilitate
the merger?
Practicalities• Is Charity Commission involvement required
- Only if insufficient powers in and no power to amend governing document or
- Governing document requires consent
Practicalities• Other consents which may be required:
- Members- Grant funders (esp. if merger would trigger
repayment)- Landlord(s)- Customers- Sector regulator
Due DiligenceOverview• Goes beyond “initial questions”• Investigations into each charity to achieve “full
knowledge”• If properly conducted there will be no nasty
surprises!
Due Diligence Scope & Who conducts•May involve:
- Lawyers- Accountants- Other advisors- In-house
•Timescale:- Can be lengthy- Plan in sufficient time so as not to lose momentum
and ensure deadlines met- Be clear about who is doing what
Due DiligenceHow & Steps• Party A (or their advisors) request information
from B for themselves (and also Shadow Board of newco)
• Party B (or their advisors) request information from A for themselves (and also Shadow Board of newco)
• Replies compiled, exchanged and considered
Due DiligenceKey to a smooth process• Ensure both sides appoint a senior individual or
team to manage the process• Agree timescales for the provision of replies to
enquiries and keep to them• Have weekly calls to ensure matters are
progressing in line with agreed timetable • Agree confidentiality terms early and a press
release in case of a leak
Due DiligenceAreas covered:• Corporate structure - subsidiaries• Accounts and supporting information • Material changes since last accounts• Banking and borrowing detail• Grants and terms
Due Diligence (continued) • Assets• Valuations if necessary• Commercial agreements• Intellectual property rights• Property (land, buildings, environmental etc)
information
Due Diligence (continued)• Staff terms and conditions / disputes• Pensions• Details of any material complaints, disputes,
litigation and claims• Sector specific regulatory compliance
ProcessMerger Paperwork – Usual• Due Diligence Reports• Board/Trustee minutes and resolutions to
proceed• Governing documents of newco• Notice of EGM of members if required• Merger agreement• Asset Transfers• TUPE letters
Cardiff Derby Nottingham
Thank You
Any Questions?
Contact details
Martyn DaviesDD: 029 2039 1745E: [email protected]
Our Merger Journey
Sian Mainwaring
Aim of this workshop
• To outline the approaches and processes we took
• Our learning experiences and challenges• Food for thought.......• Any questions
Who were we?
• Neath and Lliw Valley Women’s Aid• Together, 60 years experience supporting
women and children experiencing domestic abuse
• Organisational similarities• Operating within 1 Local Authority -
Neath Port Talbot
Who are we now?
CALAN Domestic Violence Services• First Women’s Aid groups in Wales to merge• Company limited by guarantee and registered charity• Domestic violence services for all individuals and families• Crisis intervention and preventative services• Refuge and Community Support Services• BRAVE team – specialist children and young peoples project• Lead organisation for NPT DA One Stop Shop• Campaigning and awareness raising• Big Lottery EIP project
Our merger journey
The first step....• 2010 remodelled children and young people’s
services across NWA/LVWA• A vision to integrate services, avoid
duplication, reduce central costs, increase and diversify service provision, develop specialist skills and reach more children and young people
• BRAVE – one specialist service from June 2010• Dipping our toes in “Collaboration”
Our BRAVE experience• Increased referrals to the service• Increased number of children and young people
accessing 1-2-1 and group support• Service diversity and development – RESPECT
interpersonal violence programmes, specialist therapeutic play service and prevention and education programmes
• Reputation synonymous with excellence and innovation
Why a merger?
• The development, innovation and sustainability of appropriate services to individuals and families
• Best practice and quality of services• Efficiency savings and rationalisation of resources• Capacity to respond to policy and development
opportunities • To reduce perception of overcrowded voluntary
sector
Agreed Principles
• A merger of equals• Positivity and momentum to be
maintained through the process• New organisation, new name, new
identity
The merger begins.....
• January 2011 – Neath WA and Lliw Valley WA made a formal commitment to explore a merger
• Merger Steering Group established and independent Chair appointed
• Legal consultants, Geldards LLP, appointed• Business case for merger finalised• Merger principles and deal breakers identified• Merger action plan established
Continued…..
• Due diligence exercise – financial and organisational perspectives
• Decision taken to formally transfer assets with effect from 1st July 2012
• Appointment of an independent HR consultant and drafting HR plan
• Sub Groups to the MSG established for HR, finance, governance and corporate identity
Continued…..
• Schedule of planned consultation events agreed by MSG
• Development of corporate identity• Legal documentation completed June 2012 in
preparation for formal transfer 1st July 2012
Our key elements
• Communication, communication, communication
• Consultation and engagement• Pilot programmes and interim plans• Planning and Structure• Realistic timescales• Energy and momentum
Communication
• Integral and essential• Open and meaningful• Communication plan – who, when and how• Consultation days, e-briefings, letters, team
meetings• Agreed format, content, timings• Even if no news – communication
Consultation and engagement
Staff, Service Users and Stakeholders• SWOT analysis• Organisational priorities• RBA Framework• Corporate identity• Service development• Organisational structures
Interim arrangements and Pilot Programmes
• To ensure a smooth transition post 1st July and minimum disruption to service provision
• Clear areas of responsibility and lines of communication
• Interim arrangements for Senior and Operational Managers
• Re-location of staff teams and managers• Joint on-call service
Our learning
• Organisational identity – name and branding• External facilitators and experiences• Integration of staff, services and organisational
cultures• Momentum and energy• Governance and Board development• Resources, capacity and workloads• Financial considerations post merger
Challenges.....
• A new experience for Trustees, Staff and Service Users
• Balancing merger and day to day responsibilities
• Not missing opportunities• Integrating organisational cultures• Overcoming them and us syndrome
ANY QUESTIONS?