Decision details

Further to Minute No. 74 of the meeting held on 5 October 2017, the Cabinet considered the report of the Head of Commercial Development which provided details of two proposed changes and a clarification of the Articles of Association for the Council’s Housing Development Company (the DevCo), as follows:

 

1.       A change - to allow remuneration for Non-Executive Directors of the Company.

2.    A change – of the trading name of the company, following a brand development exercise, to “Sandway Homes”.

3.       A clarification - to provide a clearer definition of the responsibilities and authority of the Shareholder Representative, a role created to allow an individual Cabinet Member to represent the collective Cabinet in relation to the DevCo.

The report indicated that if approved by Cabinet, the Articles would be updated with those changes and registered with Companies House, becoming part of the Company’s constitution.

 

Councillor Hardy referred to a typographical error in paragraph 1 d of the reasons for the recommendations, set out in the report and indicated that the reference to a member of an Overview and Scrutiny Committee should read a Chair of an Overview and Scrutiny Committee.

 

The following appendices were attached to the report:

 

Appendix 1 – Agreed definition of the role of Non-Executive Directors.

Appendix 2a – Details of Brand Development Exercise (“Brand Book”)

Appendix 2b – Details of Brand Options (“Identity Proposal”)

Appendix 2c – Details of Brand Recommendation (“Tone of Voice and Guidelines”)

Appendix 3a – Existing Articles for the HoldCo

Appendix 3b – Existing Articles for the SaleCo

 

Decision Made: That:

 

 (1)      approval be given to the change to the Articles of Association to allow for the remuneration of Non-Executive Directors as set out in the report;

 

(2)       approval be given to the proposed change to the Articles to allow trading as ‘Sandway Homes’;

 

(3)       approval be given to the detailed definition of the role of the Shareholder Representative as set out in the report; and

 

(4)       the Executive Director (Sarah Kemp), in consultation with the Cabinet Member for Communities and Housing be authorised to implement these changes to the Articles and register updated Articles with Companies House.

 

Reasons for Decision:

 

1. Allowing remuneration of Non-Executive Directors (NEDs) would make it possible to attract industry leading individuals to the DevCo Board, ensuring that the Company benefits from the extensive skills and experience that these kinds of individuals possess helping to maximise the success of the Company and the return to the Shareholder (the Council). The recommended proposals are as follows:

 

a. NEDs will be external (i.e. not Officers or Members of the Council).

 

b. NEDs will have the same voting rights as the Executive Members of the

Council (which Executive Directors include an Executive Director of the

Council (initially acting as Chair of the Board), a Head of Service (acting as

Managing Director) and the Deputy Section151 Officer (acting as Finance

Director) along with a front-line (non-Cabinet member) councillor).

 

c. Any members of the Board who are officers of the Council will not be paid any additional amount above their Council salaries for fulfilling their roles on the Board of the Companies, in line with their contracts of employment.

 

d. The front-line member of the Council would be paid a Special Allowance (at the same level as a Chair of an Overview and Scrutiny Committee), so long as they are not already in receipt of any other Special Allowance, in-line with the Council’s Constitution.

 

e. NEDs would be paid a day rate of £500 per day for their work on the

Company Board as follows:

 

·         0.5 days preparation for Board meetings.

·         0.5 days follow-up from Board meetings.

·         1.0 days for attendance at Board meetings.

·         6 Board meetings planned per year, £6k (maximum of £12k).

 

2. Adopting the trading name and brand identity developed through a market focused brand development exercise conducted recently will help position the company to compete effectively in the market place.

 

3. Clarifying the role of the Shareholder Representative will provide more robust governance of the Companies in line with the Council’s constitution whilst avoiding any unnecessary administration or delays to decision making. The recommended detailed definition of the role, which has been consulted on with the Cabinet Portfolio Holder and the Executive Leadership Team, is as follows.

 

a. The objective of the role of Shareholder Representative is to empower a single person to act for the whole Cabinet as the sole shareholder of the DevCo companies:

 

·         The holding company (HoldCo): Sefton (ACS) Holding Company

Limited, wholly owned by the Council.

·         The sales company (SaleCo), Sefton (ACS) Sales Company

Limited, wholly owned by the Council through the HoldCo.

·         Any future DevCo companies set up under the HoldCo.

 

b. The Shareholder remains the Cabinet, which retains the legal rights and obligations of the Shareholder under Company Law.

 

c. The Shareholder Representative would have full delegated authority from the Cabinet to act as the Shareholder in respect of all Shareholder decisions relating to the DevCo companies, including in particular:

 

·         Appointing and dismissing directors of the Boards.

·         Assessing and making recommendations in respect of the

performance of the Boards and individual directors.

·         Approving the Annual Business Plans.

·         Approving any in-year changes to the approved Annual Business

Plans, including new investments to be made by the Companies.

·         Making decisions in respect of Reserved Matters.

·         Chairing the Annual General Meetings (AGMs).

·         Voting on behalf of the Shareholder at the AGMs.

 

d. The Shareholder Representative, whilst not a voting Director on any of the Boards, may at their discretion attend Board meetings as an Observer to monitor proceedings.

 

e. The Shareholder Representative will be supported by the Council’s Chief Executive and Section 151 Officer in ensuring the performance of the Companies and the continued alignment of the business of the Companies with the objectives of the Council.

 

f. The Shareholder Representative may seek further consultation or approval from Cabinet on any matters for which they feel this would be appropriate, at their discretion, or for which this is required under the Council’s Constitution. This may simply be to gain support in assessing information and making decisions.

 

g. The role of Shareholder Representative will be in addition to the internal oversight role of the Cabinet Portfolio Holder in relation to the DevCo as aCouncil commercial project. The existing oversight arrangements, including monthly reviews with the responsible Council officers (Executive Director sponsor, and Head of Service project lead) are expected to continue alongside the role of the Shareholder Representative.

 

h. Therefore, the Shareholder Representative would be empowered to appoint the Boards of Directors for the HoldCo and the DevCo (so long as this is consistent with the requirements documented in the approved Articles), and to approve the updated Articles, without further referral to Cabinet.

 

Alternative Options Considered and Rejected:

 

1. Remuneration of Non-Executive Directors (NED)

 

a. Alternative Option A - do not offer any remuneration. Consultation with professional NED recruitment consultants confirmed that offering no remuneration at all would be a major disincentive for good quality candidates as it would indicate that the company was not a substantive or serious enterprise. As a result, any recruitment process would be very unlikely to attract suitable candidates, fail to appoint appropriate NEDs and be a waste of Council time and money (recruitment consultant fees)

 

b. Alternative Option B – offer a fixed fee of £8,000 per annum (in-line with the Special Allowance for front-line councillors undertaking a comparable role, such as being members of the Overview and Scrutiny committee). Consultation with professional NED recruitment consultants confirmed that good quality candidates would expect to have clarity of the fees in day rate terms at rates that are competitive in the market for NEDs of SME organisations. That consultation did confirm that it would not necessarily be a disincentive if the potential minimum annual fee was lower than £8,000 if fewer than 12 Board meetings a year was required.

 

2. Trading name and brand.

 

Alternative names/brands were considered through a market analysis and stakeholder workshop (attended by industry experts and leadership personnel from key organisations in the community). Details of the options are included in the documents in Appendix 2. The consensus from the stakeholder workshop was to adopt the name “Sandway Homes”.

 

3. Definition of the Role of Shareholder Representative.

 

Alternative Option A – do not clarify the definition of the role any more than is already included in the approved FBC and Articles. It is believed that this will result in an imperative for the Shareholder Representative to refer most decisions back to Cabinet undermining the role’s purpose and objectives.