The new thresholds will apply to all contracts let and procurements that begin after 1 January 2020.
“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.
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We are delighted to announce the following promotions within Anthony Collins Solicitors.
Procuring organisations who have to make substantial changes to a contract during an OJEU tender process can breathe a sigh of relief.
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