All trustees undertaking a proposal to work in collaboration, jointly or to merge should carry out a due diligence examination of the prospective partner charity. A comprehensive due diligence exercise will enable trustees to establish a full knowledge base of the assets and liabilities of each charity – for example, employees, rent arrears, property leases, endowments, funding arrangements and governance structures.
Of interest to those involved in charity governance.
Introduction
All trustees undertaking a proposal to work in collaboration, jointly or to merge should carry out a due diligence examination of the prospective partner charity. A comprehensive due diligence exercise will enable trustees to establish a full knowledge base of the assets and liabilities of each charity – for example, employees, rent arrears, property leases, endowments, funding arrangements and governance structures.
Purpose of this guidance
In a merger situation, due diligence is not about justifying any cost for the exchange of assets, but to identify the assets of each charity and – more importantly – any potential liabilities. The trustees of the receiving charity need to mitigate any future risks as a result of liabilities identified in the process. It is likely that the initiating charity would have already undertaken a similar exercise in assessing its suitability and preparedness for any potential merger.
This document includes:
Funding
Service agreements
Property
Contracts and leases
Permanent endowment
Accounts
Governance
Warranties and indemnities
Due diligence checklist
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