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Change in status should trigger closer student union cooperation with universities, says expert

Out-Law Analysis | 07 Feb 2011 | 10:43 am | 3 min. read

OPINION: Changes to charity law may make student unions feel liberated as they prepare to stand on their own feet as independent charities.

But though they will become separately registered charities, unions and universities need good relations now more than ever.

Just like their student members, unions will feel a mixture of excitement and anxiety when striking out on their own for the first time. A change in charity law means that since 1 June 2010 they must register with the Charity Commission as independent bodies.

Previously they sheltered under the charitable status of the universities to which they were attached, an arrangement which sometimes led to flexible, informal dealings.

That must now change, and union and university relations will become more contractual and more formalised. And that means that co-operation is more vital than ever.

Some student unions may think that this as an opportunity to break for their freedom after years of being tied to the parent university's apron strings, but the change makes it crucial that the two types of organisations work closely together.

At the moment, some universities may not have any formal arrangements with their union. Others will have arrangements that are out of date. These changes in the law offer an ideal opportunity for universities and unions to set the fundamentals of their relationship in stone as a solid foundation for all the work they do.

A financial memorandum or grant agreement should be entered into between the parties, with its contents reviewed regularly. It should identify the responsibilities of both the university and the union for achieving strong financial management.  The agreement should set out the nature of the parties' financial interaction and should enable unions to plan other fundraising activities and fly the flag of the university within agreed parameters.

By having such an agreement in place both parties will be clear about the expectations of the other and it should include mechanisms to resolve disputes and adjust financial support, upwards or downwards depending on the circumstances.

For student unions with freedom comes great and, in some cases, new responsibility. Unions are now to be treated as entirely independent from the university whose name they bear and will be expected to stand on their own feet as they enter into contracts, employ staff and manage their financial affairs.

Many unions will already have well established governance procedures in place and so this will be nothing new to their charity trustees. But some will not, and they must put the legal structure in place now to make sure that their future is secure. The change in law is an opportunity to cement processes that should have been in place before now.

Having a solid and well-defined framework in place to govern the union's relationship with a university becomes essential when you consider the particular nature of a student union. Its officers change from year to year. While a university may have a good working relationship with the officers of the union one year, the next it could meet with conflict.

Having a good contractual foundation will enable the parties to ride through any bad times. The general principles of such a foundation are the continued financial support of the union by the university, within certain parameters, and the compliance by the union with certain agreed procedures and standards.

Many disputes will centre on money, but unions and universities must be careful that their financial relationship reflects the nature of payments from university to union.

The annual grant from a university to its associated union should fall within the designation of a charitable gift. The primary condition is that the grant must be applied to further the charitable objectives of the union.

This has implications for the relationship between the two. Universities will understandably want to make sure that the grant is being wisely spent, but they cannot exert the direct control that they could if they were paying the union under a different kind of contract.

The grant is a charitable gift and not a contract for services and both the paperwork and the institutions' conduct need to reflect this or there will be unwelcome tax consequences.

If the union or any of its subsidiaries occupy university property, the basis for this also needs to be formalised by a lease or licence agreement. This should be tied into the terms of the financial memorandum. Property-related services provided by the university to the union can also be structured in a tax effective manner.

Formalising the relationship between the parties now, as part of the process of independence, will allow the unions to fly the nest fully fledged.

By Gayle Ditchburn of Pinsent Masons, the law firm behind OUT-LAW.COM