Charter Schools offer an alternative way for education to be provided to the next generation. A key hurdle can be raising the funds needed to start such a school. Impact Investing could offer a solution to this.
This approach involves individuals investing for impact – in other words, instead of donating or giving money to the cause of setting up the new Charter School, they invest in a legal structure which will allow them to have financial return while also enabling impact.
The way this works is:
- Individuals invest into a limited partnership structure. In the diagram below these individuals are shown at the top of the diagram.
- There is a general partner which is a company who actually runs the limited partnership.
- In this case, the subject of the limited partnership is the new school.
- Over time the school receives income and becomes sustainable after the initial kick-start from investors, and so is able to provide financial return to the investors.
Limited partnerships are a corporate structure that combine some key features of companies (such as separate legal personality) and partnerships (such as tax pass-through treatment).
Each situation will be unique and different, but this model could provide an alternative approach to allow a new Charter School to get off the ground. It might even be that institutional investors might be interested in investing, or religious organisations if there is an alignment of beliefs with the proposed school.
It is important to ensure compliance with fundraising rules (administered by the Financial Markets Authority), such as ensuring investors qualify as wholesale investors, or come under another exemption. Also, if it were to be open to retail (such as parents) then it would be more complicated.
An alternative to this would be to introduce a charitable entity, such as a trust, which could also play a role in such a structure as the owner of the general partner.
We have expertise in this and other legal structure types and would be happy to discuss the options available. Reach out to our experienced team here.
The information contained in this outline is of a general nature, should only be used as a guide and does not amount to legal advice. It should not be used or relied upon as a substitute for detailed advice or as a basis for formulating decisions. Special considerations apply to individual fact situations. Before acting, clients should consult their Parry Field Lawyer.
