Corporate Social Partnerships: Key Legal Aspects for your Donor Program
What are the key points to be considered by a donor offering awards for the development of solutions to/ or the carrying out of research on socially important issues such as climate change?
Legal form of the donor
There are various Swiss legal forms available to donors offering awards of this nature. Limited liability companies and companies limited by shares may be suitable in some cases; if the donors are not for profit organisations, there are two legal forms available, associations (Verein/association /associazione) and foundations (fondation/Stiftung/ Fondazione). Philanthropy And Social Entrepreneurship – A Guide To Legal Structures For NGO’s And Social Entrepreneurs In Switzerland 2017, published by the Thomson Reuters Foundation is a useful guide on this subject, including with respect to tax implications for each possible legal form.
Who may apply?
The donor will probably accept applications from any legal entity, including academic institutions, charities and non-governmental organisations. It will need to decide whether applications may come from anywhere in the World or whether there might be valid reasons to limit them to the donor’s home country or a bloc of countries, such as the EU. It will need to decide if organs of Government may apply, also individuals.
What should applications contain
Applicants should describe the nature of their projects (for example, feasibility studies, scientific or behavioural analyses or the development of machines or processes), what their projects are intended to achieve and how they propose to achieve them. They should also estimate how long their projects will take and how much funding they are requesting. As the donor is unlikely to pay many awards in advance or in single installments, applicants should propose milestones to be achieved before installments of the awards will become due.
Applicants will have to demonstrate that they have the necessary expertise and resources to carry out their projects, for example because of successful track records, experienced and technically qualified employees and their project management skills.
Applicants will have to satisfy the donor that they will remain financially viable throughout the expected period of their projects. This may require the applicants to provide extracts from their financial accounts or bank references.
Follow up questions
Applicants may be asked to provide additional information or clarifications after their initial applications have been reviewed. They may be asked to provide assurances that key employees are unlikely to move to other employers and, for applicants who are individuals, that they are in good health and likely to complete their projects in a timely manner.
They may also be asked to provide justifications for the amounts of the awards they are requesting, such as the overheads they propose to charge to their projects and amounts to be paid for any work they propose to sub-contract, especially if the subcontractors are related to the applicants.
Sole or joint funding
The donor will need to decide whether, in addition to the funds from the donor, successful applicants may also use their own funds or funds awarded by other foundations or institutions.
Who decides which applications to accept and how much to award to each successful applicant
The donor may feel that it has the relevant expertise to select the successful applications and to decide on the amounts to be awarded, and that it can do this without needing any external assistance.
However, it may wish to appoint a panel of independent experts to evaluate the applications and recommend the amount of each award. The higher the profile of the award program, the more this may be the case so that the public and all applicants can be assured that the awards have been made transparently and fairly.
The donor will appoint the experts and decide if they should be remunerated. Some experts may refuse remuneration and others refuse to act without it.
The modus operandi of the experts will need to be agreed, for example:
- whether they will meet in person or remotely,
- whether their discussions should be held in formal meetings or informally,
- whether their decisions should be made by consensus or by majority voting,
- whether they need a Chairperson and whether the Chair has a vote;
- whether the donor is represented in the selection of the award recipients and whether the donor can veto the experts’ choice of a successful applicant,
- whether any of the experts’ discussions on the pros or cons of particular projects should be published, and
- whether the details of the unsuccessful applications will be published.
Experts will have to declare that they have no conflicts of interest when evaluating each applicant’s proposed project and, if they do, they should not vote on the application concerned.
The donor will wish to carry out background checks to satisfy itself that the applicants are bona fide and to the extent possible that they have the resources they claim to have.
The donor will need to decide on a case by case basis whether any IP rights developed by award recipients during their projects will belong to them alone or, given that the projects were funded wholly or partly by the donor, partly also by the donor. This is a delicate issue and in most cases it will probably be decided that the IP should remain with the award recipients. In case a project promises to be a commercial success, with significant income from the IP, the donor may want to share a small part of it, particularly if the donor has limited sources of income and wishes to increase its cash reserves for future award programs.
In cases where the IP will be an award recipient’s property, the donor may require it to be licensed to third parties free of charge or at beneficial rates.
The award recipients will have to be audited to check that the awards were spent on the projects in the way they had promised. The donor will have to decide who pays for the audits, the award recipients or the donor. If the award recipients are to pay, the donor will wish to be assured that reputable audit firms are appointed and that the audits are likely therefore to be sufficiently thorough.
The donor will require award recipients to sign Award Agreements.
These will set out the donor’s obligations to pay the agreed award instalments at the agreed intervals, and a detailed description of the award recipients’ obligations to carry out the projects they described in their applications, including their proposed time schedules. The project descriptions should include details of resources or individuals whose participation is considered to be important to the success of the project.
The agreements will also require award recipients:
- to warrant that their constitutions/establishment documents allow them to accept their awards and to carry out of their specific projects; also, that they will carry out the projects in compliance with all applicable laws.
- to spend the awards exclusively on their projects, to keep accurate financial records and agree to be audited, either by the donor’s auditors or their own auditors.
- to warrant that their work product will be their original work and will not infringe any third parties’ rights.
- to report any delays in their projects or unexpected difficulties.
- not to make changes to their approved projects without the consent of the donor.
In appropriate cases a section will deal with the ownership of IP Rights arising under the projects (see above).
There will be termination clauses, allowing the donor to terminate if an award recipient is in breach of its obligations or becomes insolvent; also allowing the award recipient to terminate if the donor fails unjustifiably to make the award payments.