Mergers or amalgamations of two or more 'not-for-profit' enterprises can be stressful and can quickly involve a complex set of transactions. This article dicusses highlights some of the differences between the process of amalgamating two entities, and common pitfalls to avoid.

Looking for legal advice on merging two 'not-for-profit' enterprises? Let us guide you with our expert advice. Mergers or amalgamations of two or more 'not-for-profit' enterprises can be stressful and can quickly involve a complex set of transactions. It is always advised that should you be in this position, you immediately consult a legal practitioner for advice about how to proceed.

This article will discuss some basics about mergers of 'not-for -profits', some differences between the process of amalgamating two entities, and some potential pitfalls which can be avoided.

How does merging two 'not-for-profits' operate?

Unlike when two or more 'for profit' entities formally 'amalgamate', whereby the State Regulator takes control of the process, a merger of two 'not-for-profit' enterprises is far more customisable. This can be of great benefit to both entities. A merger is usually based on contractual arrangements between the two enterprises whereby the documentation will outline the new structure of the enterprise and any transfer of assets. Subject to agreement, one of two things can then generally occur. Either both former entities will merge into one completely new entity, after which both of the former entities are wound up. Alternatively, one entity could merge into the other existing entity, after which the former entity can be wound up.

These issues can quickly become complex and quite technical. Therefore, you should always obtain legal advice before entering into such arrangements in order to protect your interests.

Why do 'not-for-profits' enter into mergers?

Mergers occur on a regular basis across Australia. It is no different when a merger involves two 'not-for-profit' entities. The reasons vary greatly as to why a merger should occur. A primary reason is that both entities believe that their mission statements align with each other. Therefore, by combining all their available resources, they may be better able to fulfil that statement in a more effective, efficient manner. This could enable faster growth in their relevant sector.

What steps should 'not-for-profits' take before entering into any merger?

Apart from seeking independent legal advice, there are a number of steps you can take prior to beginning talks surrounding any possible merger. This is called undertaking due diligence.

Due diligence is a process which promotes disclosure between the entities, including their current financial resources, human resources, any outstanding liabilities and any other potential issue that may be unique to one particular entity. By investigating any potential issues before entering into any negotiations, it may save you considerable time and money into the future.

Also, any party seeking to potentially enter into a merger should also be fully aware of any existing legal structure of the other entity. This may vary depending on whether the other party is another 'not-for-profit' or a registered charity under the Australian Charities and Not-for-Profit Commission (ACNC). This is another issue that you must discuss with your legal practitioner before commencing negotiations.

What are the potential disadvantages of a merger?

From an entity perspective, the main disadvantage is that employees may in fact lose their jobs if their position is either no longer available or another individual from the other merging entity is given their position. Despite this potentially occurring more with 'for profit' enterprises, it is still a potential downside in any merger. Hence, if you are going to merge 'not-for-profits', you must be aware of this risk of having disgruntled employees. However, if this results in a larger share of the market where you can have greater social impact, then it may still be worth merging.

If your 'not-for-profit' entity is contemplating merging with another entity, Sharrock Pitman Legal can diligently assist you in ensuring that your interests and positions are advanced. Call Sharrock Pitman Legal today on 1300 205 506 or complete the form below.

The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

Liability limited by a scheme approved under Professional Standards Legislation.

Written by a member of our Legal Team

David Sharrock

For further information contact

Mitchell Zadow

Mitchell is the Managing Principal of our law practice.

He is an Accredited Specialist in Commercial Law (accredited by the Law Institute of Victoria). He also deals with areas of Employment Law, Wills & Estate Planning and Probate. For further information, contact Mitchell on his direct line (03) 8561 3318.

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Mergers or amalgamations of two or more 'not-for-profit' enterprises can be stressful and can quickly involve a complex set of transactions. This article dicusses highlights some of the differences between the process of amalgamating two entities, and common pitfalls to avoid.

However, in this article we will set out the factors that influence how long it will take to obtain a Grant of Probate and to administer an estate in Victoria.

The basics

First things first: what is a Grant of Probate? A Grant of Probate is effectively a document issued by the Supreme Court of Victoria which formally authorises an executor to manage the estate of a deceased person in accordance with their Will. Without Probate, the asset holders (say a bank or share registry) cannot be satisfied as who has the correct authority to receive the deceased's assets and may refuse to pay out.

Sometimes, for smaller estates or if assets are mostly jointly owned with a surviving spouse, asset holders might agree to release payment without requiring a Grant of Probate. This is usually on the basis that the person who receives payment promises to repay (or Indemnify) the asset holder if it turns out they paid to the wrong person.

If there is no Will, then you cannot obtain a Grant of Probate. Instead you obtain Letters of Administration. This is effectively the same, in terms of authorising someone to administer the estate, and would usually be obtained by the person who is the closest next-of-kin to the deceased.

“A Grant of Probate is effectively a document issued by the Supreme Court of Victoria which formally authorises an executor to manage the estate of a deceased person in accordance with their Will.”

Timeframes for Probate in Victoria

In order to obtain a Grant of Probate, the Supreme Court needs to be given information about the assets and liabilities of the estate, the deceased person, the witnesses to the Will, the executors and the Will itself. An advertisement of your intention to apply for Probate must also be published on the Supreme Court website for at least 14 days prior to any application being lodged.

Often, making enquires to obtain all the necessary information can take a number of weeks. Also, you will need the Death Certificate for the application for Grant of Probate and possibly for making proper enquires regarding the assets and liabilities. Waiting for the Death Certificate to issue can therefore add a few more weeks to the process. Overall, if you have your application for Grant of Probate lodged within 1 to 2 months from the date of death, you are making timely progress.

The Court itself usually does not take long to process the application (maybe another 1 to 2 weeks) and this is completed using the electronic Supreme Court filing system. This means you do not have to go to a Court hearing. The timeframe for processing applications for Letters of Administration is even less, given that there is no Will document for the Court to consider. There is also a general discretion for the Court to raise a 'Requisition' asking for more information before they review the application - this can sometimes delay matters.

“Overall, if you have your application for Grant of Probate lodged within 1 to 2 months from the date of death, you are making timely progress.”

So, here we are a few months after death and you finally have a Grant of Probate or Letters of Administration. It is important to remember that this is the start of the estate administration and not the end. For a very simple estate, you might only need a further month or so to cash the assets and pay them to the correct beneficiaries. However, it can often be more complex than that. Factors that determine the timeframe to administer the estate include:-

Some assets will take time to cash or transfer. For example, if selling a property, final settlement might be 60/90/120 days from the day of sale.
There is a 6 month period for challenges to be brought against the estate and executors must wait until this period expires before distributing the estate, if there is any risk that a disgruntled family member might come forward.
There might need to be final tax returns for the deceased or for the estate. Failing to wait for the ATO to process these could leave the executor personally liable for a tax bill.

You might need to advertise for creditors to come forward and wait for a period of months while this advertising timeframe expires. This protects the executor if they are unsure of all of the deceased's financial dealings and creditors.
It might not always be a good time to immediately cash estate assets. For example, the shares just took a nose-dive, do you still sell regardless of available price?

There is a general rule that executors have an 'executor's year' to complete the estate administration. This means that you should be aiming to have the estate finalised and distributed within 12 months from the date of death.

Liability limited by a scheme approved under Professional Standards Legislation.

Need help with Probate?

Our expert legal team is ready to take your call!

Mitchell is the Managing Principal of Sharrock Pitman Legal. He is an Accredited Specialist in Commercial Law (accredited by the Law Institute of Victoria). He also deals with areas of Employment Law, Wills & Estate Planning and Probate and can answer all your questions related to probate.

For further information, contact Mitchell on his direct line:

DIRECT LINE:

(03) 8561 3318

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Merging two 'not-for-profit' enterprises

Mergers or amalgamations of two or more 'not-for-profit' enterprises can be stressful and can quickly involve a complex set of transactions. This article dicusses highlights some of the differences between the process of amalgamating two entities, and common pitfalls to avoid.

How does merging two 'not-for-profits' operate?

Why do 'not-for-profits' enter into mergers?

What steps should 'not-for-profits' take before entering into any merger?