Date04 Apr 2022
Historically, charities have found many different ways to work collaboratively with other charities or the commercial (‘for-profit’) world, often this is via informal arrangements, bringing together knowledge, skills and resources to reduce costs and better serve beneficiaries. The pandemic provided the impetus to many organisations, both to review current arrangements to ensure that they remain financially viable, and to explore new ways of collaborating.
Sometimes these arrangements are more formal in their nature, with agreements in place either to cover a specific piece of work or project, or an arrangement for the longer term via joint working arrangements, partnerships, joint programmes perhaps for a specific campaign, joint venture agreements, and ultimately through to full mergers.
One method of charities in particular working together to achieve a shared project or service is by having a formal agreement specific to that project or service which may be time-limited or long term. Often this sort of arrangement is referred to as a joint activity and the agreement should set out each side’s contribution, costs and input to the project or service as well as how it will be delivered. As with all structures of this type, you should take legal advice for the drafting of the agreement and, among other things, ensure that each party is working within the terms of their objectives and will further their charitable purposes by the arrangement. Practically, for this sort of joint activity to be possible, the two charities will need to have similar objectives and comparable activities.
For the purposes of this insight, a joint venture refers to a situation where two entities setting up a separate, jointly owned company to undertake a joint activity and ring fence the risk of that activity in the separate legal entity.
The parties to the venture may be two charities but could equally be a charity and a commercial entity. The joint venture company will need its own governance structure and board of directors, usually with representation split between the two joint venture member organisations. The company may employ its own staff, be VAT-registered and have its own banking arrangements.
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