Understand relevant legal frameworks
Frameworks governing changes in legal status are different in each state and territory. It is important you understand these frameworks, or receive legal advice on the implications of changing your organisation’s legal status. This will help you to avoid (for example) unanticipated increases in your tax liabilities, or changes to your deductible gift recipient (DGR) status.
You will likely require tailored legal advice for some steps in the merger process, which can be hard to fund in a not-for-profit context. Where possible, seek independent professional advice. If this is not feasible, ask your board whether their contacts are willing to provide pro, or low-bono assistance. And while this is not the recommended approach, sometimes members of skills based boards may be willing to provide their own expertise free. This raises the potential for conflict of interest, putting that board member in a compromising position. In the long run, remember that the costs associated with deciding against independent advice may outweigh the cost of overlooking an aspect of the preparation ultimately crucial to successful integration.
Justice Connect provides information to support you through the process and also operates a telephone advice service. Figure 5 lists some of the areas where you may require legal advice through stage 2, 3 and 4 of the merger process.
Additionally, review your current commitments to other organisations through service level agreements, contractual obligations and partnership arrangements. Government contracts for example may contain clauses about not transferring the contract to another entity. It is critical to understand whether rights and obligations can be assigned to a different organisation (in the case that a merger proceeds) and the financial implications.
Please feel free to leave questions or comments on this part of the merger toolkit.