Agenda item

To consider the attached report (C-031-2019-20).

(1)   The Cabinet approved the Qualis Group Shareholder Agreement.

(2)   The Cabinet noted the Directors Roles and Responsibilities.

(3)   The Cabinet noted the terms of reference for the Qualis Group Board Meetings.

(4)  The Cabinet approved the selection and recruitment process for Group Board

 Members.

(5)  The Cabinet appointed the Interim Board on the recommendation of the Leader in consultation with the LRA Group Leader and operate in accordance with the Shareholder Agreement.

The Interim Strategic Director introduced the report on Group Company Governance Documents. She gave a short presentation based on the presentation given by the legal advisors ‘Penningtons’ on the Council Group Company Governance on 3^rd February 2020. The full presentation can be found at:

https://rds.eppingforestdc.gov.uk/documents/g10423/Public%20reports%20pack%2007th-Feb-2020%2014.33%20Bulletin.pdf?T=10

It was noted that in order to ensure that there was effective governance of the Council Group Companies there was a requirement to put in place several key documents to provide the framework for control of decision making, levels of authority and powers of delegation.  The Shareholder agreement set out the matters that the Directors of the relevant company could not undertake without the express consent of the Council specified body.  This report covered the draft Shareholder Agreement including the ‘reserved matters’ schedule, the guidance on Directors’ Roles/Responsibilities, and the Terms of Reference for Board meetings. 

It was proposed that the composition of the Board be made up of a combination of Council Officer Appointees, Council Members (pro-rata) and Independent Non-Executives.  The paper set out the selection and recruitment process of the Group Board and the Qualis Managing Director.

The Qualis Group and subsidiaries would move from the governance of an EFDC Group Steering Board (Membership: Cllr S Stavrou, Cllr A Patel and Cllr H Whitbread, Cllr B Jennings, CEO Georgina Blakemore and Qualis Lead Sacha Jevans) to a formal company structure with Board Directors both Executive and Non-Executive but with approvals on key and significant matters being retained by EFDC.

An Interim Board appointed by Cabinet would operate in order to ensure Qualis delivers on the commitments made to EFDC embedded within the 20/21 Budget.

Members will be pro-rata represented (currently 2 Conservative, 1 LRA). The two conservative members would be Councillors Philip and Avey. The LRA member was still to be nominated.

Councillor S Kane commented that he was fully supportive of this but did have some reservations on the governance, openness and transparency. He asked how the process of appointing the temporary board would differ from appointing the final board and would the councillors elected on the interim board have an unfair advantage over the other candidates going for the full board. He was told that the initial interim board was to be pro-rated with two conservative and one LRA Councillor. The full board would be subject to an open interview upon application by a top-level interview panel. Councillor Kane then asked what if we did not find three councillors with suitable qualifications for the full board and questioned the public perception of having three elected members being appointed. He would prefer to see no elected members as members of the board, but have an elected member work alongside the gatekeeper, making this a dual role of one officer and one member. He was told that the interim board would show up any initial problems with the public perception or operation with councillors on it. the important thing was that this was a commercial entity and could not be run as a committee. They would look at and review this set up after six months. However, councillors would know what this council needed. But nothing was settled at this stage and this was just for setting up the interim board.

Councillor Jon Whitehouse noted that the remuneration for the board members amounted to several hundred thousand pounds per year, although the table was unclear on this. Was there a danger of double counting here as some of the company’s functions were existing council functions and were financed at that level. The views of the council’s remuneration panel should be taken into account on councillors as board members, and also, we have executive officers being appointed to do work effectively on behalf of the council and that should be considered.

Councillor Philip noted that the company was separate from the council. They would be acting as directors of the Qualis group and that would be the primary objective, acting with all the responsibilities you would have as a non-executive director of a company. There would also be a company secretary in place to keep them right from a legal point of view when operating as the interim or full board. It was a separate role from the council role.

Councillor Patel asked the about the ability for the company to offer land to a community-based group or maybe reduce the rent for them, would it be possible for them to do this.  And, could we create a registered charity through the Qualis group. Nick Dawe said that they could do this as long as it was appropriate use and had been properly evaluated. And one of the terms of the Qualis Group was that it be a community interest company, i.e. a charity, for charitable purposes yet to be determined.

As for the allowances mentioned by Councillor Jon Whitehouse, he confirmed that they were benchmarked and related to the scale of the organisation and the complexity of the job and were also crossed referenced to other payments made to public bodies.

Councillor Bassett asked for clarification on what would happen if the Qualis board wanted to do something that was against EFDC policy or not what we would like to happen. He was told that there would be district councillors on that board, and they would have to agree to each business case put forward.

Councillor Hadley asked if the review of an annual business case was enough. He was told that the business case was reviewed annually as it laid down overall objectives for the organisation, but there would also be monthly and quarterly reports; and the authority would have the right to access the books of the company at any time. Councillor Philip added that they were intending to bring the one-year business case to the next cabinet meeting to be reviewed.

Councillor Bassett asked who the voting members on the board would be. He was told that it would be the whole board.

Councillor Hadley noted that the Qualis Board could give charitable donations up to £50,000 without referring upwards. Where did this figure come from as it seemed rather high? He was told that it came from general custom and practice. It was noted that in their first years there may not be any space for significant charitable donations. They did not know yet what the right level would be, and it was suggested that the interim board initially review this.

DECISION:

(1)   The Cabinet approved the Qualis Group Shareholder Agreement.

(2)   The Cabinet noted the Directors Roles and Responsibilities.

(3)   The Cabinet noted the terms of reference for the Qualis Group Board Meetings.

(4)  The Cabinet approved the selection and recruitment process for Group Board

 Members.

(5)  The Cabinet appointed the Interim Board on the recommendation of the Leader in consultation with the LRA Group Leader and operate in accordance with the Shareholder Agreement.

Reasons for Proposed Decision:

It is a requirement the Council ensure that the appropriate governance documents are in place for the commencement of operational activity/trading within the Group Company Structure. 

Other Options for Action:

The operation of the new Group Company Structure would not proceed without the correct governance arrangements in place to ensure the effective management and control of decision making between the Council and its companies.