Charity lawyer Ian Hempseed of Hempsons, an ACEVO corporate partner, offers tips on how charities can effectively execute collaborations.
Top tips for collaborating
Collaboration can be undertaken for many reasons, and sometimes in haste. If you don’t do your early planning properly, you can leave unresolved issues which can fester and later debilitate what you set out to achieve. Tight deadlines may also lead partners to side-line the more complex issues which they then find difficult to address once the focus of effort has moved on to the delivery phase.
You should be clear from the outset on the key fundamentals:
WHY are we doing it?
WHO should be our partners?
WHAT do we need to know about our partners?
HOW will we structure and make it work?
Considering a collaboration? Here are some factors to consider during talks:
- Be clear on the rationale
There could be more than one purpose. The collaboration may be time limited for a particular project or a framework for a continuing relationship. The reasoning behind the collaboration should be established early in the very first stages. - Partners
Your focus should be on who can best help you to achieve your objectives. This may be a public or private sector investor, or even a combination of both, so don’t exclude this as a possibility. - Know yourself
Are your charitable objectives wide enough for the collaboration? If not, you may need to apply to the Charity Commission for their approval to amend them. - Confidentiality
Get all the partners to sign a confidentiality agreement before you start disclosing any sensitive information, keep the potential collaboration between yourselves. - Know your partners
Do due diligence but keep it balanced to assess risk and ability to deliver to your expected standards. Highlighting reputational risk and how to manage it can be a key concern. - Key assets
If success is dependent on being able to use assets provided by a partner, make sure they own them or have necessary rights to make them available. You don’t want to be accused of infringing the intellectual property of a third party. - Risk and control
How you decide to share risk will help define the levels of control held by each partner. Be clear whether you have liability for default by another; that might also take you outside your objects. - Governance
You must have a robust system for decisions, management, reporting and monitoring. If you create a “board”, they should be entrusted to act, as speed could be of the essence. Decide on the appointment process to the board. - Funding and shared resources (e.g. staff and intellectual property)
What does each partner supply at set up and from then on? Could there be binding calls for future funding? Beware of exposure to losses by giving very wide indemnities. If staff are seconded, how is the employer’s risk shared? Always consider the employee’s rights. - Conflict of interest
Identify early on any serious conflicting issues and agree a policy for managing these. - Safeguarding against failure
Never the most popular topic! However, you do need to consider how you can preserve the collaboration against a failure, and of course protect your beneficiaries. Have a system for identifying and managing problems early on – relying on the power to expel may not resolve the problem. - Evolution
Building flexibility to allow your collaboration to evolve, e.g. to take on new partners or projects.
Legal structures
Only when you have identified your key features should you decide on what structure would achieve this. There are various options, here are some examples that you might want to consider:
- Lead contractor and sub-contractors where one organisation takes the ultimate control and risk. That risk is then shared with sub-contractors to the extent of the service they agree to provide.
- A contractual joint venture – where the advantage of flexibility may outweigh the downside of not being able to ring fence risks.
- A separate company – where the partners want to ring fence risk or to build up a trading history. The board would have statutory responsibilities which may lead to more robust governance.
Finally…
Don’t forget VAT, tax and accounting! These issues are just as equally important in the melting pot – so speak to your accountants early in the process to avoid any unwanted surprises!
Ian Hempseed is a charity lawyer who has a wide range of experience in the field of commercial, constitutional and governance law. He works closely with organisations, public sector staff and entrepreneurs in developing appropriate legal structures for social enterprises. Ian heads the Charities and Social Enterprise team at Hempsons, whose broad expertise in advising charities, social enterprises and other not for profit organisations enables them to provide pragmatic and proactive advice to the sector as a whole.
Phone: 020 7484 7530
Email: i.hempseed@hempsons.co.uk
