Working together, to work better

Without a doubt, the pandemic has impacted most aspects of life across all sectors. As we head out of restrictions, charities of all shapes and sizes have been and should continue, evaluating their purposes and how best to fulfil them. Having weathered the storm so far, the conclusion for some charities may be that it is in the best interests of the charity and its beneficiaries to collaborate or merge with one or more other entities. Some charitable entities will be in the fortunate position of being able to offer support or to take on and merge with others in the current climate. The benefits of collaboration and, where appropriate, a merger can be more efficient operation, stability, cost savings and continued or better able to meet and advance the purposes for which a charity was originally created. As registered or exempt charities, those operating in the education sector can achieve the same benefits.

Working collaboratively can take several guises ranging from informal arrangements such as information or knowledge sharing and association membership to more formal partnerships or project-based ventures, such as sharing resources, staff or accommodation. Whilst collaborating the parties involved will remain separate and distinct from each other, but the trustees of each entity must ensure that the other entities are compatible in terms of their objects, their activities and their structures. In considering collaboration, the trustees of each entity must seek to advance their own entity’s objects for its beneficiaries and the benefits could include cost savings, better/improved service quality and/or greater access to services by a broader range of beneficiaries. The collaboration will not be without its risks though, so before embarking on such arrangements, the trustees must ensure they comply with their duties and carry out a full analysis of the benefits and risks and undertake due diligence on the proposed partner(s).

Sometimes, a more formal and longer-lasting arrangement will be the most appropriate way to ensure that a charity can best fulfil its objects. An independent school may opt to merge with another, with compatible objects and beneficiaries. Equally, standalone academy trust or a multi-academy trust may opt (or be directed or required by the Department for Education) to join a/another multi-academy trust. One or more maintained schools may choose to merge by forming a new multi-academy trust. In each case, the merger will involve the transfer or combining of assets and liabilities of two or more charitable entities with only one independent school or one multi-academy trust continuing and taking control, or a new multi-academy trust being formed to do so.

Before proceeding with a merger, the trustees will need to check whether they are entitled to do so by the charity’s governing document or by a relevant legal power or whether the consent of any other party must be sought. The benefits of a merger may be numerous, but the main rationale is generally to obtain more and greater benefits for the charity’s beneficiaries whilst making better use of its assets (including its funds). When considering the appropriateness of a merger, the trustees of each entity will need to comply with their usual duties and ensure that they have analysed all relevant risks and benefits of taking this route, including undertaking appropriate due diligence on the other party and the various assets and liabilities involved.

Over the last year, we have been instructed to advise upon mergers and collaborations for a range of charitable clients, including independent schools and multi-academy trusts and the current climate means this trend could be set to continue. There are opportunities and benefits to each of the parties involved and, more importantly, their beneficiaries, which may indicate that charities should consider working more collaboratively as part of their ongoing strategic approach.