Guidance

Template Legal Documents For Mutualisation

A suite of template legal documents to support the development of mutuals.

These legal templates have been prepared to provide general guidance and information to organisations considering or undertaking mutualisation. The documents will be a useful starting point for mutuals and commissioners working on a spin-out.

They have been drafted according to a series of assumptions of a “typical” spin out scenario:

  • The mutual is being set up as a Community Interest Company
  • The service will transfer from a Local Authority
  • The service will be funded by the Local Authority by a grant or contract for services
  • There are 50 staff and very few physical assets to be transferred
  • The Local Authority will transfer two properties for use by the mutual, one under a lease and the other under a licence to occupy
  • The Local Authority will continue to provide back-office services to the mutual

In practice there is no standard mutual model with organisations choosing to adopt different forms and structures. Therefore these documents should be adapted on a case by case basis. For the purposes of these documents we agreed a “typical” spin out scenario would follow the process set out below:

  1. A public service is transferred from a Local Authority to a mutual. In order for the mutual to take over provision of the service, all of the relevant assets are transferred; the property, equipment, staff and contracts which make up the undertaking itself. This transfer is set out in a Transfer Agreement.

  2. At least at the outset, the service will be funded by the Local Authority and this will be either by grant or by contract. The parties will therefore enter into a Funding Agreement or Services Agreement, which contains the relevant obligations on the Local Authority to pay the funding to the mutual, and also on the mutual to provide the services in accordance with the agreement.

  3. The mutual will usually take over occupation of one or more Local Authority buildings from which to run the service under lease(s) or licence(s) to occupy.

  4. Finally, the Local Authority may continue to provide back office services to the mutual, such as HR and IT. This arrangement is often agreed on a shorter term basis than the main spin-out agreement, and will be governed by a separate contract between the parties (the Back Office Services Agreement).

The templates have been developed by Bates Wells Braithwaite in collaboration with mutuals and the Mutuals Team at the Department for Digital, Culture, Media & Sport. They are intended to be a starting point only and should not be considered as finalised legal documents or as constituting legal advice. It is the responsibility of your organisation to seek legal advice and to ensure that all documents are reviewed and signed off by your legal team. The following template documents are available to download.

Template Funding Agreement

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Template Services Agreement

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Template Transfer Agreement

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Template Back Office Services Agreement

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Template Lease

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Template Licence to Occupy

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Published 14 August 2019