There are more and more incentives and opportunities for farmers and land managers to collaborate on environmental, conservation and other projects.
Current stewardship programs and future local nature and landscape restoration programs provide incentives for farmers and land managers to work together to provide environmental and other public goods on multiple farms.
Private sector operators also buy services from groups of landowners – for example, water companies seeking to ensure better water quality in all watersheds or developers seeking to ensure a net gain in biodiversity in the area. long term to compensate for the loss of development.
See also: Sussex farm weighs pros and cons of biodiversity pilot project
A key question at any given time in a project’s existence concerns the type of structure through which organized farmer groups should operate.
The choice will depend on a number of factors. These include whether there is an accredited facilitator holding funds and coordinating delivery; whether the client (public or private) wishes to deal with a single entity rather than with several different farmers; and whether non-profit organizations such as wildlife trusts are key stakeholders.
Julie Robinson of Roythones examines four key arrangements and outlines some of the considerations for those who get started.
1. Unincorporated association
This is the simplest model, where a group of farmers can work together as members of an unincorporated association and no separate entity is created. Each farmer or land manager would have their own stewardship agreement or ELM and would be responsible for its implementation.
The group would usually have a paid facilitator who is responsible for coordinating the entire project and monitoring and reporting on delivery. While there may not be a complete written constitution, there will usually be a steering committee in larger groups.
Benefits Flexible, no deposit formalities or registration fees for installation.
Disadvantages Cannot contract or own assets in their own name, so if the group needs to purchase a kit, hire outside expertise, or employ an administrator, it will be the individual group members who will take on these responsibilities. The absence of a formal constitution can lead to disputes.
2. Company limited by guarantee
If farmers prefer something more formal, but without making their life too complicated, they could set up a company limited by guarantee.
As members, they do not own any shares but guarantee the debts of the company up to a limit of their guarantee (usually £ 1).
The company may hold a management system agreement (or an ELM test and trial agreement) in its own name, with individual member agreements behind the main company agreement.
If the rules of the scheme allow, the company could be responsible for auditing the performance of members and members would be paid for their work by the company.
Benefits The less expensive of the limited company models, the off-the-shelf incorporation available, may be non-profit or allow for the distribution of surpluses.
Disadvantages Filing and presentation obligations, subject to company law, unlikely to be suitable for profit distribution based on investments made by members, a separate entity for tax purposes.
3. Public limited company
If a group plans to make a profit and wants to be able to distribute it as dividends, then an action model may be more appropriate.
So, for example, if the group becomes a recruiter for other landowners to carry out remunerated activities according to the overall scheme, with the group receiving an additional amount for this from the client, the group will generate profit. Dividends would be a usual means of redistributing these profits to the members of the group.
4. Community interest company
This is a relatively new business model. It is likely to be used where there is a wider range of stakeholders, including local community groups or nonprofits. There are constraints on the distribution of surpluses and assets of the company upon liquidation.
Benefits Easy and inexpensive to set up, constitution model available.
Disadvantages A separate regulator, restrictions on the distribution of surpluses, must have a Community objective.
- Take the time to define the objects of the organization – members must act on them.
- Be clear about member commitments and liability for non-delivery, which is a problem. There should be an agreed approach, following discussions with the ‘customer’, on delivery levels across the landscape and to what extent members who do not deliver will compensate other members if payments are affected. Much will depend on how much buffer is available in the overall system to allow for some non-execution (eg 90% full delivery of nitrate reduction plans along a stream).
- Make sure there are opportunities and rules for members to leave (eg length of notice period).
- How is the steering group / board appointed? How are decisions made and justified?
- Make sure that someone is responsible for filing returns and keeping the documents in order (a corporate secretary in a company).
- Get accounting advice on the most tax-efficient way to manage the inflow and outflow of money. This is essential if there are surpluses / profits.
- Agree up front on what basis the surplus / profits will be distributed among the members.
- Have appropriate service contracts with third parties and employment contracts.
- A dispute settlement mechanism is vital.
Julie Robinson is a partner at Roythones and leads the law firm’s agricultural team