Once you have established your charity, you might want to work with another partner organisation on a number of ventures which may include a one-off event, a sponsorship arrangement, a joint venture, partnership and auspice agreement or some other arrangement which would allow your charity to deliver services.
When you are planning on working with a corporate partner or another charity, there are many issues to keep in mind. You should ask yourself the following:
- What is the goal of the partnership?
- What is each party getting out of the relationship?
- How long will the partnership last? and
- What is your exit strategy?
Even if you have a good relationship with a partner, it is important to understand how and why you can terminate the relationship as you never know what the outcome might be.
When working with a sponsor, you should have a clear understanding of the relationship, what each partner will receive and the benefits. A sponsorship agreement is an important document that clearly sets out the rights and responsibility of everyone involved, who will be providing what and the payments and benefits available to each party.
If a corporate partner has provided you with a sponsorship agreement, it is prudent to have a specialist lawyer review it to ensure the agreement protects you and asserts obligations on the sponsor. Sponsors may request you meet a variety of standards and it is important to understand what you are signing up to.
Sponsorship agreements will address the following:
- Terms of the agreement;
- Payment schedule;
- Intellectual Property issues;
- Liabilities and Warranties;
- Obligations of both parties;
- Termination clauses; and
- An option to terminate if you no longer want to associate with the company anymore (for example, they become bankrupt or a scandal affects their brand).
Another way that many organisations receive funding is via auspicing whereby a charity provides funding and resources to another charity and they provide the particular service or undertake a project. Sometimes charities that can’t receive funding will use auspicing as an alternative. An important document in this process is an Auspicing Agreement which will set out the terms between the auspicor and auspicee.
There are several issues to consider when drafting your Auspice Agreement, including:
- Insurance and the distribution of risk between the parties;
- The level of support and resources that the auspicee will receive from the auspicor;
- Where the project involves the creation of content, research or discoveries it is important the intellectual property rights of each party are clearly stated and identified upfront; and
- Where the parties will be working together on location or in the same office space, the parties should consider office space, who will be providing equipment and/or paying for a lease.
As with your sponsorship arrangement, it is important to understand how and when your relationship can be terminated and what happens when one party is not happy with staff or contractors working in either organisation. The Agreement should also set out the practical matters to do with the relationship and the project, for example, the costs and budget, timeline and reporting obligations.
Joint Ventures and Partnerships
Two charities may decide to work on a joint venture for a specific project or a longer period. You should be sure that this is the right structure for your charity before entering into a joint venture arrangement.
As with any other document which brings together two parties it’s important to understand what each party puts into and receives from the arrangements, the limitations on the activities, how the joint venture will be run and how it can be wound up. A commonly used term is a partner agreement. However, you should be clear on what the partnership entails exactly and whether this is a term used with its general meaning or legal definition as set out in the relevant state laws.
Before entering into any partnership or joint venture, you should first speak with your accountant who can also help you to understand the tax implications of these different structures concerning your charity.
Memorandum of Understanding (MOUs)
Another document typically used in the not for profit sector is MOUs. MOUs should not be seen as a less formal or binding document than any other legal agreement as set out above. Unless the document you receive states specifically that it is not intended to be legally binding, you should be very wary and make sure a charity law specialist first reviews any MOU. An MOU is often provided as a precursor to drafting the final document so it is essential you are comfortable with the terms it contains.
There are lots of different ways to work with other not for profits and corporate organisations. In working out which structure is the best option for your charitable organisation, there are many factors to consider including, the purpose of the relationship, and what each party expects to get out of it. You also need to consider what legal documents or arrangements you need to put in place to make the arrangement happen and the tax, insurance and liability issues associated with each structure. When looking at any relationship with another organisation, think about how well you will work together, how you will address any Intellectual Property and how the parties can wind up the relationship. Importantly, if you have any questions – ask. You can get in touch with our charity law specialists on 1300 544 755.