Foundation trusts face narrowed commercial opportunities because of a gap in the government's insolvency regime, the Foundation Trust Network has warned.

The regime for failed trusts was published for consultation in September. It says the state will take over failed trusts' assets and a special administrator will decide what happens to them.

But the network's response - seen by HSJ - says the lack of clarity about assets developed and owned jointly by foundation trusts and private investors will "inhibit" the growth of such investment and that private sector partners will be unwilling to risk an investment being seized if a foundation fails.

Bad deal

Network director Sue Slipman said: "Foundations won't get as good a deal if this isn't sorted out."

"The government hasn't come to terms with the nature of a foundation trust. The Department of Health view is that all these assets are created by public money and so can go back to the department, but that's not true because some will have been created by private money," she added.

The network says it would be preferable if joint ventures were treated separately if a trust failed, so the asset could be parcelled up and sold on, giving the private investor the chance to salvage some of their investment or to buy out the foundation's share.

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