Agenda item

Companies Committee - Governance arrangements

Report from The Deputy Leader of the Council.

Minutes:

At the Council meeting on 1 March 2019 agreement was made to establish a Companies Committee to replace the Shareholder Committee. The number and breadth of Council companies had increased since the establishment of the Shareholder Committee and a fresh approach was needed.  Council owned companies must by law operate at arm’s length from the Council and have their own decision-making arrangements. The proposed arrangements were designed to enhance corporate governance, to give an oversight and overview of all activities. The report circulated with the agenda listed at 1.9 the number of entities that were wholly owned by the Council, their governance arrangements and their key aims.

 

·         Gravitas Housing

·         EnvironmentSK Ltd

·         EnvironmentSK (Commercial Services) Ltd

·         InvestSK

 

Two further entities were listed, DeliverSK and HomesSK. DeliverSK was being established as a joint 50/50 venture LLP where as HomesSK was in early discussion.

 

Each company had its own legal obligations and duties. The role of the Companies Committee was to provide the Council with a helicopter view, an oversight about the activities of the companies and the direction the Council wanted them to take.

 

The arrangements meant that the Council would be seen to be acting in an open and transparent manner in respect of its trading activities, objectives of the companies were being delivered, performance and risk were being managed and the extent of delegation of responsibilities was clear.  A proper balance would be achieved between transparency and commercial confidentiality.

 

The Companies Committee would have an oversight function of the companies at a strategic level, not on the day to day decisions at operational level; this would be for each Company Board. The remit would ensure that the Council built successful companies or other appropriate legal vehicles and that it approved the company business plans for each company to ensure that resources were deployed to achieve the outcomes and objectives that the Council wished to see being delivered. It would also ensure that a robust performance framework was in place through which the companies could report their strategic performance against their Business Plan.

 

The Interim Head of Legal referred Members to the appendices attached to the report. Appendix 1 dealt with the new Companies Committee and included the Terms of Reference. Powers relating to the Chairman and Vice-Chairman were also listed, including dealing with matters of an urgent nature. The operational mechanisms were for each individual company to determine. The Companies Committee was to have a strategic level overview making recommendations to the Cabinet on how it should exercise its functions and ensure that the activities of companies were conducted in accordance with the corporate values of the Council.  The Terms of Reference also included making recommendations to the Cabinet on the appointment or removal of Council appointed company directors or on any aspect of the strategic performance of the companies/ventures within its overview and scrutiny role.

 

A short discussion followed on what was classed as an emergency but it was stated that similar wording had been included within the remit of the Shareholder Committee and the Interim Head of Legal referred Members to Appendix 2 which reproduced the Shareholder Committee remit, she indicated that it was a standard power to enable business not to be held up.

 

Further discussion on the role of the Companies Committee followed and concern was expressed about recommendations made by the Companies Committee to the Cabinet and about the “weight” these recommendations would have with the Cabinet. It was stressed that a review of the Constitution was taking place (next item on the agenda) and the Terms of Reference of the Committee would be kept under review. One Member referred to the difference in content between the two appendices and the Member felt that the Cabinet would determine a lot.  Reference was made to Part A of the Shareholder Committee appendix which contained more functions than was being suggested for the Companies Committee, including matters that should be determined by a company Board itself.  The Shareholder Committee had been set up in a different time which had now moved on and that information was for each individual company do determine itself. The aim of the Companies Committee was to be strategic, and not exercise operational control over the companies.

 

Further discussion followed in connection with the responsibilities of the people running the individual companies. It was important that training and guidance was undertaken by officers and members in relation to this aspect especially when people were “dual hatted”.  The roles between being an officer of the Council and being a board member of an individual company were different and the legal obligations between the two roles were different; training in relation to this was essential.

 

More discussion then followed about the individual companies and their remits as well as the proposed companies. The Companies Committee would have a strategic role looking at the individual and family of companies, and looking at a high level at the delivery of business plans through a performance framework in an oversight role.

 

The Chairman referred to IAG. The Strategic Director, Growth confirmed that this was in relation to DeliverSK and had been signed off by the Cabinet Member for Growth.

 

The roles within the companies were again discussed and the complexity of wearing different “hats” when sitting on a company and being a member of the Council, and being an employed officer of the Council and sitting on one of the companies as a board member.  It was felt that more clarity was needed around how this should work and be governed. This would be picked up as part of the Constitution review.

 

A question was asked about EnvironmentSK and commercial waste, to which the Strategic Director, Commercial and Operational replied. A comment was made that acronyms should be reproduced in full. One Member asked if collaborative arrangements such as the East Midlands Building Control service was included. The Strategic Director, Commercial and Operational stated that there was no intention that this would be part of the Companies Committee’s remit.

 

More discussion on the role of the Companies Committee followed. The governance framework had been designed so that checks and balances were in place together with scrutiny and oversight to ensure the Council’s ambitions were achieved. The performance framework would enable more high-level reporting, with the ability to drill down by the Companies Committee if they required more detail. The recommendations as contained within the report were then proposed and seconded and on being put to the vote agreed.

 

Recommendation to Council:

 

1.    The Constitution Committee notes and accepts the proposed governance framework as set out in the Companies Committee report (10.06.19).

2.    The Constitution Committee recommends to Council that the Companies Committee is set up in accordance with the content of the Companies report (10.06.19) and approves the Terms of Reference for the Companies Committee as set out in Appendix 1.

3.    That Committee Members receive training and information on the legal functions of companies, LLPs, joint ventures and the respective roles of officers and members involved in these entities as well as directors of these companies.

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