Report of the Deputy Leader of the Council.
Appendices 5 and 7 to this report are exempt under paragraph 3 of Schedule 12A of the Local Government Act 1972 (as amended) because they contain information relating to the financial or business affairs of an individual or organisation.
The Committee received a report on LeisureSK Ltd, its Company Structure and Business Plan. A decision had been made by Cabinet, which was endorsed by the Committee, to transfer the Council’s leisure service to LeisureSK Ltd on the expiry of the current leisure contract on 2 January 2021.
Since the decision had been endorsed by the Committee work had been undertaken to establish the optimal company structure, five-year business plan, draft Articles of Association and consideration of the appointment of Company Directors. Consultation had continued with the existing leisure centre staff on their transfer to LeisureSK Ltd.
The Company had been set up as a not for profit Teckal company, limited by guarantee. This would allow the Council to directly award the leisure services contract, without going through a competitive tender process. It also meant that the Company had to procure goods and services through EU Procurement Law. Following advice LeisureSK Ltd was established as a non-profit distributing organisation (NPPO), which allowed the Company to qualify for VAT exemptions in specific areas.
Key legal arrangements were needed to be put in place to define the Council’s relationship with LeisureSK Ltd, these included: A Leisure Management Contract, Leases and Alternative Arrangements, Resourcing Agreement, Articles of Association, Members’ Agreement and a 5-year Business Plan.
In presenting the report and proposing the recommendations, the Cabinet Member for Growth put forward two additional Directors: the person holding the post of the Cabinet Member for Finance and Resources and the person holding the post of the Cabinet Member for Culture and Visitor Economy.
Members discussed the content of the report and the following points were raised and addressed as follows:
· Would there be a Service Level Agreement between LeisureSK Ltd and South Kesteven District Council
Some level of professional support may be sought from the Council, there would be a formal Service Level Agreement in place and appropriate re-charges would be made.
· The five-year Business Plan, which would be revised once business cases had been finalised, would the Committee have sight of the revised document
The Head of Leisure advised that a detailed Annual Business Plan would be presented to the Committee, which would include how the Company would engage with its customers.
· That there be involvement of leisure facility users with the Board of Directors
Members were advised that a non-executive director would be appointed to the company, it was anticipated that they would have a wealth of relevant experience to bring to the Company. User panels would also be formed, so that the Council could maintain oversight of feedback when holding the company’s performance to account.
· Further consideration be given to the level of remuneration for the appointment of a non-executive director
It was explained that the advised figure was within market average and that any individual appointed would take on considerable responsibility which carried a level of risk.
· Concerns regarding risk over Covid-19 and any further lockdowns and the affect it may have on the viability of the company
All scenarios had been considered and if there were any significant changes, they would be reported to the Committee.
· Clarification as to why a charitable organisation was not the choice of structure for the company
Members were advised that options on the formation of the Company were considered at a meeting of Cabinet. It was agreed that the formation of a Teckal Company would prove the most beneficial to the Council. The Director of Law and Governance agreed to provide written detail on the chosen company structure. The Head of Leisure noted that as the current contract was shortly due to end and options were limited in the leisure market, the chosen option was the most prudent. The options appraisal considered by cabinet provided detail, it was agreed that this would be re-circulated to members.
a. The Director of Law and Governance provide Members with technical document on the chosen company structure
b. That the options appraisal considered by Cabinet, be re-circulated to members.
c. Whether the withdrawal from the EU would have any effect on the company in relation to provisions for Teckal companies
The Director of Law and Governance advised that as many EU Laws had been embedded into UK Law, that would not have an effect on the Company.
Request for clarification regarding the appropriate Member forum to scrutinise the work of LeisureSK Ltd
The Chairman agreed that it would be useful to have an agreed forum and said that he would raise it for discussion at a meeting of Scrutiny Committee Chairmen. The outcome of this would then be reported to a future meeting of the Committee.
d. The Chairman to discuss, at the next meeting of Scrutiny Chairs, the appropriate forum for members to scrutinise the work of LeisureSK Ltd and report back to the next meeting of the Committee
e. Clarity on Member appointments to LeisureSK Ltd, if they were due to their positions as Portfolio Holders
It was confirmed that member appointments to the Directorship of the Company were due to their role as Portfolio Holder. Should they no longer serve as Portfolio Holder, the Directorship would then pass to their successor. At the request of members this requirement was to be added to the recommendations of the report, for member approval.
Following a vote, members agreed to discuss Appendices 5 and 7 to the report in exempt session. The appendices were exempt under paragraph 3 of Schedule12A of the Local Government Act 1972 (as amended) because they contain information relating to the financial or business affairs of an individual organisation.
Councillor Ashley Baxter requested that his objection to the exclusion of press and public be noted.
Members discussed the financial information, which was presented in the restricted papers. Once discussion on the exempt items had concluded, the meeting returned to public session.
Following a vote by exception the Committee agreed the following recommendations.
Councillor Ashley Baxter requested that his vote against approval, be noted.
1. The Committee noted the further work undertaken to establish the optimal company structure for LeisureSK Ltd which would ensure that the Company is financially efficient and would benefit from savings in relation to VAT and business rates.
2. The Committee endorsed the draft Articles of Association, Members Agreement and Resourcing Agreement detailed within the report as the main documents which will govern the Council’s relationship with LeisureSK Ltd.
3. The Committee endorsed the five-year high-level business plan provided within the report for the purposes of allowing the Council to make appropriate budget allocations to support the ongoing operation of LeisureSK Ltd.
4. Agreed to receive a detailed business plan from the Directors of LeisureSK Ltd at the earliest opportunity once the company had been fully established and the Directors had been appointed.
5. Endorsed the commencement of a recruitment process to identify a suitably qualified and skilled Non-Executive Director to sit on the Board of Directors for LeisureSK Ltd.
6. Recommended to Council that the Leader of the Council, Cabinet Member for Finance and Resources, Cabinet Member for Culture and Visitor Economy and the Director of Growth and Culture be appointed as Directors of LeisureSK Ltd.
7. Noted that LeisureSK Ltd may require working capital in advance of the Company being operational in order to ensure a smooth transition to the new arrangements.
8. That a member may only hold their position as Director of LeisureSK Ltd, whilst they maintain their role as Portfolio Holder.