Collaborative Working & Agreements With Trading Subsidiaries
Wednesday 16th May 2012
Karen Collins, Senior Associate
Collaborative Working Overview• Why collaborate?• Legal structure of the collaboration – the options• The first steps – key considerations• Contractual collaborations – Key legal issues
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
Why collaborate?Advantages include:• Reduction in overheads• Sharing of skills• Reduce duplication of effort
Legal structure – the options
• Contractual collaboration• New legal entity
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
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
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
Legal structure – new legal entity• Replacement entity - merger• Additional entity – joint venture company or
limited liability partnership
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
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
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
Working together: the first steps• Understanding
• your objectives• your culture• your limitations
Working together: the first stepsChoosing the right partners• The importance of getting it right• The importance of “soft issues”
• Politics• Cultural • Policies• Practical implications – redundancies? Compatible
IT systems?
Working together: the first steps• Be open and up front about
• Fears• Outcomes• Disputes• Exit strategies
• Trust between partners is key
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
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
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
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
Cardiff Derby Nottingham
Thank You
Contact Details
Karen CollinsDD : 029 2039 1707 [email protected]
Top Related