Exit Strategies
Alex Peel
Bradford CVS
Today’s session
• What are exit strategies and why have one?
• What issues do we need to consider when
looking at exits?
• How do we support organisations to think
about exit strategies?
• Our training/information needs?
What are exit strategies?
‘You can not know how you should start a project if you
do not know how to close it.’
Anon American Business Guru
‘A plan for what will happen when this funding ends –
either by winding down the project in a planned way,
or earning income from charges, or finding new funding
sources.’
Fit for Funding
And for businesses
• A well thought-out exit strategy can help you to maximise the
value you get from your business, successfully market your
business to potential buyers or investors and ensure you end
your involvement with as little disruption to the business as
possible.
• Regardless of whether your exit occurs to a planned schedule
or you are forced to make a move for unexpected reasons,
the decisions you make when setting up can affect how easy
it is for you to eventually exit your business.
Business Link website
Why have an exit strategy?
• Why bother – isn’t wait and see what happens
enough of an option?
What should be included?
What should be included
• Project options
Fixed term project which ends when funding ends –
how is this managed
Specific money injection – build or develop
tool/resource
Project continues with further grant support
Continues by being contracted to deliver a service
or selling a product
Continue through using funds raised by donations
or subscriptions
What should be included?
Organisation Options
• Survival
• Dormancy/Hibernate
• Merge/Partnerships
• Wind Up
Survival
• Clear Aims and Objectives, Values and
Mission
• Planning Ahead
• Regular Reviews
• Build up Reserves
• Good Financial Management
• Avoid Reliance on One Funder
Dormancy
Resolution at meeting and Auditors
Reporting to Companies House- returns.
Reporting to Charity Commission
Reporting to members
Following the Governing document
Striking off - 2 strikes
Merge
Powers Allowed by Governance documents?
Merge to create new body? Aims of that body compatible
Time to do Due Diligence Exercise -proposed partners
demonstrate financial/legal/strategic position
Due Diligence –in house/advisers/auditors
Partnership issues / relationships?
Staff issues -employing body/contracts.
Register of Mergers Charity Commission
Drivers for merger (in theory)
Internal desire to provide more/ better services to beneficiaries
Internal increase efficiency through better use of resources
Internal prevent duplication of services
Internal financial difficulties
Internal raise profile and/ or boost income
Internal loss of key staff/ trustees
Internal “survival & rescue” – organisation in jeopardy merges with another
with similar objectives, so services continue
External pressure from funders to reduce duplication
External government encouragement
External competition with similar organisations
External stakeholder opinion
External public perception of overcrowded voluntary service
( Source: NCVO)
Drivers in practice
1 We want to reach funding we can’t reach on
our own – consortium
2 We might have to call it a day – [rescue]
merger
(Thanks to Richard Spencer from the WY Partnerships project for this slide)
Winding Up
..is the process of
•
Ceasing to operate
•
Stopping activities and services
•
Dismissing staff
•
Closing premises
•
Paying bills
•
Terminating contracts
•
Dealing with liabilities
•
Distributing any remaining assets
Liquidation
Is a formal process governed by the Insolvency
Act
• Involves selling or disposing of the assets of an
organisation and dealing with liabilities
• Can occur if the organisation is solvent or
insolvent
• Compulsory or voluntary
Tests for Insolvency
• Cashflow (going concern)test – can the
organisation pay debts as they fall due and
can do so for the foreseeable future
• Balance Sheet test – are total assets more
than total liabilities (including current,
contingent and propsective liabilities)
Dissolution
• Is the final stage in ending the organisation
• Unincorporated orgs can dissolve themselves
in accordance with governing document
• Incorporated orgs cease to exist when they
are removed from the relevant register
Precautionary Notice
An organisation approaching the end of a
contract or funding cycle without knowing
whether there will be replacement funding
may need to undertake a redundancy
consultation and give employees notice of
redundancy – this is called a precautionary (or
protective) notice of redundancy
Issues in winding up
• Checklist from Legal Handbook
Winding Up Unincorporated
Organisations
• Set down in Constitution/good practice ?
• Resolution at general meeting /notice period
• Transfer remaining assets to comparable
organisations/purpose
• Who has powers to act -agree these beforehand –
record
• Using up and spending grants /donations
• Creation and submission of final accounts
• Liability of debts – remains with committee/ and
former members.
Winding Up A Solvent Company
Apply for Voluntary striking
Not operated/trading for 3 months previously (except for disposing of assets)
Special resolution at general meeting/begins liquidation/companies house
Notification of closure /whom?
Activities cease except for winding up process
Members Voluntary Winding Up
Members (majority) make formal declaration of solvency/date statement of assets
and liabilities.
Pay all debts within in 12 months
Winding up begins with resolution/general meeting/no trading after.
Appointment of liquidator/manages process.
Informing Companies House.
Winding Up - Charity
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Special general meeting agree dissolution
Charge officers with clearing debts and agree degree of
initiative of officers.
Inform Charity Commission (online form)
Final report nil balance
Winding Up Insolvent Companies
Company Voluntary Agreement
Directors make proposal to members/creditors to satisfy debts
Insolvency practitioner appointed and manages process
Charity
Set of accounts to CC
As above but if not able to act ( lack of quorum/trustees= C.C consulted)
Creditor’s Voluntary winding Up.
Company members pass extraordinary resolution to wind up
Creditor’s meeting – present statement of company affairs/appoint a
liquidator who manages process
Supporting organisations?
Why is it difficult to think about exit strategies
and winding up?
How can we broach the subject/support
organisations?
What do they think?
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Funders
Partners/other organisations
Staff
Members
Users/Beneficiaries
Public
Emergency Support
• Expert
• Pair of hands
• Facilitator
• Set expectations
• Provide support
• Move on
NCVO: Supporting 3rd Sector Organisations in Crisis
Supporting Groups
Encourage them to SET GROUND RULES
Avoid infighting and blame.
Work Together.
Keep information flowing
Set clear goals.
Prioritise.
Who does what?
Supporting Groups
Encourage them to KEEP CALM
Follow the governance and legal stuff
Try to plan ahead
Record what you do
Prioritise
Don’t Panic!
Sources of information
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DTA Early Warning Guide
Charity Commission publications
Companies House publications
NCVO Supporting Groups in Crisis
PERS/WYCAS/ACAS
???
Our training/information needs