The monthly round-up from the Anthony Collins Solicitors charities team.
“To merge or not merge” that is the question – well it is at least a question that most charities ask at some point in their development as they look to the future and how best to achieve their charitable purposes.
“Mergers” can take many forms: collaborative working, an asset transfer from one charity to another, the creation of a new charity, joining a group of companies as a subsidiary etc. The right format for the merger will depend on the parties involved, the reasons for the merger and the aims of the merger. However, key to every merger are the people. You can never underestimate the importance of communication and relationships. Charities are, after all, made up of individuals who are often passionate about “their” charity. It can become personal when a merger involves a name change, a new logo, a different focus. The success of a merger rarely depends on the legal structure but always depends on the time spent building relationships, communicating, creating a shared ethos, vision and a way of working that respects each charity’s history and USP.
However, (as any good lawyer would say!) there can also be legal challenges on a merger, some of which were highlighted in the Law Commission Report: Technical Issues in Charity law published last year. These challenges include:-
- the legal structure to use: contractual, a new charity, the transfer of assets from one charity to the other’ becoming a subsidiary etc.;
- can a Pre-Merging Declaration be used to transfer a charity’s property;
- whether registering the merger on the Charity Commission’s Register of Mergers will ensure that all legacies left to a closing charity pass to the “merged” charity. (The Law Commission has recommended reforms to the Charities Act 2011 to ensure this is the case, as case law has shown that it will not always be so); and
- what happens to permanent endowment? How will this be held as it cannot become the property of a corporate charity, such as a charitable company? Instead, it has to continue to be held on its permanent endowment trusts, perhaps with the corporate charity becoming the sole trustee. In addition, any sole trustee of permanent endowment property has to have “trust corporation status”. The Law Commission identified the difficulty of obtaining this (it can invoke an application to the Lord Chancellor) and has recommended the process is simplified.
But mergers can, ultimately, lead to new creative ways of working and whilst the journey there might be bumpy the hope is that it will lead to a brighter future for all the charities involved.
If you would like any more information about mergers, please contact Edwina Turner.
In this ebriefing, we identify what we see as the key messages arising from recent prosecutions in the care and housing sectors.
A recent High Court case on costs could prove essential reading for clients who have cases in the magistrates' courts.
The employment and pensions team offer practical advice on whistleblowing.
Partners, David Alcock and Sarah Patrice, have been involved in reviewing the new Code of Governance for community-led housing, published on 21 May 2021 by the Confederation for Coop Housing.
Following the eviction ban being lifted on 31 May 2021 and further to our previous ebriefing, the new notice of seeking possession forms are now available on the Government website as Word versions.
The European Court of Justice's standpoint on the Wiener Wohnen landowning developer case, and how the level of influence over the work did not amount to a decisive influence.
The Law Commission's Technical Issues in Charity Law report revealed that many charities struggle with a range of technical issue in the law.
The Law Commission recommended four key changes to the law in respect of mergers and the incorporation of charities which we have detailed in this ebriefing.
Over the last few weeks, we have published individual ebriefings on some of the key changes to be implemented following the Government’s response to the Law Commission’s report.
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