Establishing a New University-controlled Subsidiary, Affiliated Entity, Joint Venture or Unincorporated Activity
|Policy Title||Establishing a New University-Controlled Subsidiary, Affiliated Entity, Joint Venture or Unincorporated Activity|
|Policy Owners||Owned jointly by the Vice President and General Counsel and the Vice President for Finance and Chief Financial Officer|
|Responsible Offices||Office of the General Counsel and Office of the Chief Financial Officer|
|Contact Information||Questions concerning this Policy or its intent should be directed to the Office of the Vice President and General Counsel at 412-268-9519; or the Office of the Vice President for Finance and Chief Financial Officer at 412-268-2992.|
|Pertinent Dates||This Policy was approved on May 15, 2016.|
|Approved By||The Board of Trustees of Carnegie Mellon University.|
|Entities Affected By This Policy||Members of the university community.|
|Who Needs To Know About This Policy||Faculty and staff.|
|Forms / Instructions||n/a|
|Reason for Policy / Purpose||The university must impose tight controls in order to ensure that the university is able to exercise responsible stewardship over its tangible and intangible assets, manage its risk exposure and facilitate compliance with reporting and other legal requirements.|
|Abstract||The Policy establishes process and protocol for the creation of university-controlled subsidiaries, affiliated entities, or joint ventures.|
With respect to the establishment of university-controlled subsidiaries, affiliated entities, or joint ventures, the university must impose tight controls in order to ensure that the university is able to exercise responsible stewardship over its tangible and intangible assets, manage its risk exposure and facilitate compliance with reporting and other legal requirements. This Policy also applies to unincorporated activities within the university that provide goods or services or otherwise generate revenue outside of ordinary university operations, but shall not apply to student activities or activities operated by student organizations.
This Policy does not apply to entities created under the university’s spinoff guidelines or in which the university retains less than a controlling interest in the entity.
Carnegie Mellon University establishes corporate entities which are controlled by the university and operate as separate subsidiaries or stand-alone affiliates and joint ventures only if there are compelling legal and/or business reasons to justify creation of a separate entity. For purposes of this policy, the term “controlled subsidiary, affiliate or joint venture” means an entity which is controlled by the university, including, for example, ownership of more than 50 percent of the voting rights in the entity or an ability to appoint a majority of the governing body. In order for a controlled subsidiary, affiliate, or joint venture or such unincorporated activity within the university to begin operations, the following procedures must be followed:
- The Vice President and Chief Financial Officer and the Vice President and General Counsel will examine the proposal for creation of such entity or unincorporated activity.
- Those executive offices will report to the President and to the Provost as to whether compelling business and/or legal reasons support establishing a separate entity. In the case of a proposed unincorporated activity, those executive offices will report to the President and the Provost regarding the proposed reasons for establishing the unincorporated activity. Their reports shall include, among other things, a report on the manner in which the new entity or unincorporated activity shall operate, the manner in which the university's name (or any part thereof) is proposed to be associated therewith, and assurance that the new entity (whether it is intended to be a for-profit or not-for-profit entity) or unincorporated activity will operate in a manner that complies with the university’s obligations as a tax exempt entity, and the controls which will be in place.
- After the steps in Sections 1 and 2 are completed, the approval of the Board of Trustees must be obtained before the university-controlled subsidiary, affiliated entity or joint venture or unincorporated activity may begin operations.
- Once the approval of the Board of Trustees is obtained, the controlled subsidiary, affiliated entity, or joint venture or unincorporated activity may begin operations, strictly in accordance with the approval provided by the Board of Trustees, including any specific requirements placed thereon by the Board (including, without limitation, with respect to the association with or use of the university’s name). In all circumstances, the controlled subsidiary, affiliated entity, or joint venture or the unincorporated activity shall operate in a manner consistent with the university’s requirements under section 501(c)(3) of the Internal Revenue Code. The Vice President and Chief Financial Officer and Vice President and General Counsel shall be responsible for reviewing and reporting to the Board of Trustees periodically regarding the operation of such entities or unincorporated activities in accordance with this Policy. Further, the Vice President and Chief Financial Officer and Vice President and General Counsel shall jointly review and report to the Board regarding the operation of university-controlled subsidiaries, affiliated entities, joint ventures or unincorporated activities which existed as of the date of the adoption of this Policy.