F&GP Meeting November 2017

WR I GLEY S ---- S OL I C I TOR S ----

13 October 2017

"Due diligence"

If they have not already done so, the trustees of GFTUET should consider the following:

 What impact would transferring the nursery to a separate vehicle have e.g. would it have a positive or a negative effect on GFTUET's financial position?

 Whether any employees would TUPE across (I assume that you will advise on this further, if required), and more importantly whether any incorporation, asset transfer or TUPE transfer is likely to trigger debts under the Pensions Act 1995, under the pension scheme's rules and/or under regulations governing statutory schemes. Such debts can be very significant and difficult to manage, once triggered. Our pensions team would be happy to provide a costs estimate for advising on the pensions implications of restructuring if that would be of assistance. Your client may also wish to speak with their pension scheme provider to get an idea of the size of any likely debt.  Whether they have any contracts/grant funding agreements which have clauses preventing assignment to a third party. Sometimes the T&Cs for grant funding have "clawback" provisions, where the funder can ask for their money back if the charity tries to transfer its activities to another organisation.

 How they would manage potential conflicts of interest if there is any overlap of personnel on the two boards.

 Taking advice from their accountants on the tax position e.g. the corporation tax income tax, VAT and SDLT implications of structuring the nursery activities in different ways.

Summary

The pensions issue is a significant one, and may end up being the "tail" that wags the "dog" when it comes to any potential restructuring. Your client should investigate the pensions position as soon as possible if it is looking to restructure. We would recommend that the trustees of GFTUET consider whether to incorporate GFTUET (subject to the pensions issues being surmountable and the "due diligence" exercise not raising any other concerns). Charities benefit from tax reliefs, but the price they pay for those tax reliefs is increased regulation. If a separate charity is established, the trustees of GFTUET may experience a reduction in control over the nursery activities. We recommend that the trustees of GFTUET ask their accountants to do an assessment of the tax savings to be made through operating the nursery through a charity compared to a non-charitable trading subsidiary. It will then be a

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