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Report of the Council on the incorporation of Cambridge Enterprise as a limited company

The COUNCIL beg leave to report to the University as follows:

1. The Review of the Research Services Division (RSD) conducted in 2004 (Reporter, 2004-05, p. 1047) recommended that Cambridge Enterprise be separated from the Division. The Council accepted this recommendation, temporarily placed Cambridge Enterprise under the supervision of the Registrary and the Pro-Vice-Chancellor for Research, and requested the Pro-Vice-Chancellor for Research to formulate plans for the further development of Cambridge Enterprise. During 2005 the Finance Committee and the Council considered a preliminary proposal from the Pro-Vice-Chancellor for the establishment of Cambridge Enterprise as a limited company wholly owned by the University. This proposal was developed into a comprehensive implementation plan, taking into account the financial, legal, and personnel consequences of incorporation, as well as governance and taxation matters. During the development of the plan a new Director and Chief Executive of Cambridge Enterprise, Ms Teri Willey, was appointed. She takes up her position full time in August 2006, but has been consulted and is fully supportive of the proposals set out in this Report.

The Council now intend to proceed with the incorporation of Cambridge Enterprise into a company wholly owned by the University and publish for the information of the Regent House the details of the proposed implementation plan. Having considered all the factors referred to above, the Council consider that the best course is (i) to rename Cambridge University Technical Services Limited (CUTS) as Cambridge Enterprise Limited (CE Ltd); (ii) to transfer the staff of Cambridge Enterprise into CE Ltd; and (iii), through the Nominations Committee of the Council and taking into account the recommendations of the Finance Committee, to appoint a new Board and Chairman for the company. These proposals have been endorsed by both the Finance Committee and the Planning and Resources Committee.

2. The mission of Cambridge Enterprise is

(i) to aid the transfer of knowledge from the University via commercialization;
(ii) to aid staff and students in making their ideas more commercially successful; and
(iii) to produce a financial return for inventors, Faculties and Departments, and the University as a whole.

These elements are usually, but not always, aligned. Where there is conflict amongst them, resolution should start with the presumption that these elements are in priority order as listed above.

This mission accords with the University's goals to transfer the knowledge it creates for the benefit of society and the economy; to reward staff; and to run its affairs in a financially sound manner. Moreover, it takes into account the obligation placed on the University by the main sponsors of our research to have in place mechanisms for the commercialization of research and the substantial funding provided by the government for Cambridge Enterprise through the Higher Education Innovation Fund (HEIF) to support technology transfer.

4. The Review of RSD recommended the separation of Cambridge Enterprise because of the difference in mission. Incorporating Cambridge Enterprise into a limited company is an extension of this thinking as it will provide an organizational structure that is compatible with the commercial activity of Cambridge Enterprise, and the commercial risk which that inevitably entails. The intention is to engender a commercial culture, provide financial transparency, and allow flexibility of employment conditions, but most importantly to provide a decision-making environment in which goals and risk tolerance can be set by a Board of Directors to which a Chief Executive is accountable. The current arrangement in which all technology transfer contracts are with CUTS places the Board of CUTS in a position where they are responsible for the negotiation and administration of those contracts without having direct control of the personnel in Cambridge Enterprise (who are employees of the University) who carry out the underlying work. The proposed arrangement will also assist in drawing a boundary around potentially non-charitable technology transfer activities of the University.

5. Renaming the current CUTS as CE Ltd removes the need for the transfer of assets and licensing contracts from CUTS to a newly created company. The custodianship of the University's intellectual property portfolio held by CUTS, whether predating the formation of Cambridge Enterprise or not, would thus be transferred to CE Ltd by virtue of the renaming. New intellectual property which accrues to the University would also be placed in the ownership of CE Ltd.

6. The Council also propose that a new subsidiary company be created to handle the consultancy activities of Cambridge Enterprise. This company would replace the current CUTS for this purpose and would be entirely owned by CE Ltd. (For branding reasons, it may be given the name CUTS.) The creation of such a separate consulting company would ensure that the intellectual property vested in CE Ltd is not exposed to the residual liability which would rest with this new subsidiary in relation to consulting which it subcontracts to academics.

7. CE Ltd would not be in any sense a spinout. It would be and would remain wholly owned by the University. The University would control CE Ltd through the appointment (and if appropriate dismissal) of its Directors and through a Nominated Officer, the Director of Finance, who would represent the University as shareholder at Board Meetings and provide a liaison between the company and the Finance Committee. The rules that would govern the conduct of CE Ltd will be spelt out in a Memorandum of Understanding (MoU). The current version of the MoU is available at http://www.enterprise.cam.ac.uk/cam_only. This specifies the governance structure of CE Ltd, the mission and scope of the activities that it is required to undertake, and lists those actions for which express approval from the University acting through the Finance Committee is required. The MoU balances the desire to create an organization that can operate largely in an independent fashion, while giving reassurance to the University that CE Ltd will pursue the objectives defined by the University and remain accountable to the University. In every sense, CE Ltd would be part of the University. Any profits made by CE Ltd would be transferred into the University after a provision to ensure that a level of working capital (agreed by the Finance Committee) was available to CE Ltd.

8. The Planning and Resources Committee have recommended that the resources to be made available to CE Ltd should be maintained at the current levels for Cambridge Enterprise except for an increase in HEIF funding. The increase in HEIF funding will reflect an increase in the total HEIF funding now available to the University, and coincides with a decrease in other grant income available to Cambridge Enterprise. The overall result will nonetheless be a net increase in the funding which CE Ltd will receive, which will be applied to the provision of a business development function within an incorporated CE Ltd.

9. The Planning and Resources Committee have agreed that the services and support that the University currently provides to Cambridge Enterprise, including legal, estates, personnel, and finance be maintained. The terms on which this support is to be continued will be set out in an Administrative Services Agreement. The current version of this agreement is available at http://www.enterprise.cam.ac.uk/cam_only.

10. More importantly, the Committee have further agreed that these levels of funding and support should be maintained for a period of five years from incorporation in order to provide the company with a basis for planning.

11. A baseline business plan for CE Ltd for the next five years has been produced. This is simply a roll forward of current activities and shows CE Ltd to be viable within the resources which would be assigned to it. A summary of this is given in Annex A. There are two versions of the summary, one which includes occupation of the East Forum by CE Ltd, the other which does not. The baseline plan is to be reviewed by the newly appointed Director who is expected to improve upon it and, over a five- to ten-year time frame, put CE Ltd into a position of financial sustainability, requiring no resources from the University other than ownership of such intellectual property as accrues to the University under its IP Policy.

12. The position of CE Ltd will be reviewed five years from incorporation to assess its performance against the criteria given in Annex B. At that point, if performance has not met the criteria, the Finance Committee and the Board will consider what remedial steps are required. If it is determined that a separate company is not the best organization for the University's technology transfer functions, CE Ltd will be reabsorbed into the University.

13. The staff of Cambridge Enterprise have been informed and consulted about the proposed incorporation. Employees would move into CE Ltd under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). The final stage of this consultation will inform all employees individually of any change in terms and conditions which would result from the change in employer (no material changes are anticipated), and this will be completed before the new company is formed.

29 May 2006ALISON RICHARD, Vice-ChancellorD. LOWTHERVERONICA SUTHERLAND
 A. J. BADGERD. W. B. MACDONALDLIBA TAUB
 Z. BARANSKIJAMES MATHESONLAURA WALSH
 RICHARD BARNESMARTIN REESBEN WHEELER
 NIGEL BROWNG. A. REIDJOAN M. WHITEHEAD
 RUTH KEELINGDAVID SIMONRICHARD WILSON

ANNEX A Baseline business plan summaries

This information is available as a PDF file:

ANNEX B

Statement of criteria to evaluate performance of CE Ltd

CE Ltd should be evaluated in terms of its financial performance, service provision and reputation, and activity.

Financial performance for the next five years should be judged on a basis of financial self-sufficiency. The University would subsidize CE Ltd through Chest and HEIF funding and through the provision of services. CE Ltd surplus is the net profit after dispersal to departments1 but including equity realizations and any unpaid-for services provided to the University. The criterion for financial performance is simply whether the subsidy minus the surplus is in decline and showing progress towards a positive return by 2016.

Any investment funds managed by CE Ltd should have well-defined purposes and well-defined return on investment (RoI) targets, which are net of any management charges. These purposes and targets will be reported to the Finance Committee.

Service provision and reputation can be partly evaluated by activity (see below), but should also be examined, e.g. by survey, in terms of perceived improvement by academics and those external to the University that interact with CE Ltd. Reputation, most likely in national terms, is harder to ascertain but should be considered.

Activity should be considered in terms of a wide set of metrics. A fuller discussion of these can be found at http://www.enterprise.cam.ac.uk/cam_only. In general CE Ltd should exhibit a long-term increase in all of the following with some consideration of the potential pitfalls of the overemphasis on any one:

In brief, CE Ltd will be expected to increase its activity while progressing to profitability and delivery valued service to academics.

1 Departments are legally part of the shareholder, but are not to be treated as such for the purpose of this calculation.


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Cambridge University Reporter 1 June 2006
Copyright © 2006 The Chancellor, Masters and Scholars of the University of Cambridge.