Members received the report of the Chief Executive and the Chief Operating Officer of Rother DC Housing Company Ltd (RDCHC) which provided an update on the governance arrangements of RDCHC, as well as the Council’s arrangements for the governance of RDCHC.  The update had been informed by a recent report, ‘Local Authority Company Review Guidance (Local Partnerships LLP 2021)’.

The purpose of the governance arrangements were to ensure that RDCHC had enough freedom to achieve its objectives, whilst the Council had enough control to ensure that its investment was protected, returns on investment could be secured and that RDCHC activity was in keeping with the strategic objectives of the Council. The strategic objectives of RDCHC could be found within its published Business Plan 2022-25.

Appendix A to the report provided an overview of the current RDCHC structure, the shareholder’s governance arrangements for its company and the interface between the two entities. RDCHC continued to regularly review the Blackfriars scheme with the shareholder representative in order to continue to support the delivery of the Blackfriars project on terms to which all agreed.

RDCHC Articles of Association were produced with Trowers & Hamlins to provide a framework for the governance of RDCHC and the services of a company secretary from the Council’s shared legal service with Wealden District Council had been recruited to support compliance with the Articles of Association and the Companies Act 2006.

RDCHC had been reviewing its governance arrangements since the appointment of a new Chief Operating Officer (COO) in January 2022 and had recently appointed an external consultant to undertake a review and position appraisal.  The review would focus on governance arrangements, as well as RDCHC’s business plan and the performance of the development at Blackfriars.

Appendix B to the report included an outline of the governance arrangements and staffing resources the shareholder and company could adopt; the structure was subject to further refinement by RDCHC and the shareholder representative, following the present review that was being undertaken by RDCHC’s external consultant.  The review to date had provided assurance to RDCHC’s board that the Articles of Association and Shareholder Agreement were broadly effective and fit for purpose, however there were aspects relating to governance that required improvement which included skills and resources, company business plan, Service Level Agreement and internal audit.

RDCHC was not a department of the Council and was a non-contracting entity, albeit one that was wholly owned by the Council.  RDCHC and its shareholder was to avoid the risk that RDCHC drifted into the status of a Teckal company.  (Teckal companies were subject to complex regulation and were subject to the same procurement regulations as the Council.  Therefore, a Teckal company would not possess the same independence and agility to operate as a non-contracting entity.)  RDCHC continued to consult with its legal contractor Trowers & Hamlins to properly ensure the company’s non-contracting status was maintained. 

The shareholder representative was reviewing how to achieve the requisite resources and structure to ensure RDCHC had enough freedom to operate, while ensuring its investment was protected, returns on investment could be secured and that company activity was in keeping with the strategic objectives of the Council. 

Members were given the opportunity to ask questions and the following points were noted during the discussions:

•           RDCHC was registered with Companies House and the Council was the Person of Significant Control;

•           as the sole shareholder, the Council needed to be satisfied that the required resources and expertise were in place; the position would become clearer after the completion of the review in the autumn;

•           RDCHC’s initial project was large with high risks;

•           the performance of RDCHC would be scrutinised by the Overview and Scrutiny Committee and the governance arrangements monitored by the Audit and Standards Committee. Members commented that as the financial performance was high risk, this should be monitored by a sub-committee of the Audit and Standards Committee, but this would be discussed further after the review was completed;

•           the review would highlight the further knowledge and expertise required to staff RDCHC and would look at best practice within other similar companies;

•           the Council owned 100,000 shares in RDCHC;

•           RDCHC’s accounts were separate to the Councils’, using different software packages and staff were seconded to RDCHC.  A former Section 151 officer was employed by the Council, who had expertise in dealing with Council-owned companies;

•           Members were concerned that the role of the Audit and Standards Committee was still unclear and commented that the Council’s Internal Audit department should be given a role;

•           officers would review how the risks arising from RDCHC projects were presented in the Council’s risk register; and

•           it was recommended and agreed that the outcome of the review be reported to the Audit and Standards Committee, either to the September or December meeting, depending on the timing of completion.

RESOLVED: That:

1)    the present governance arrangements of Rother DC Housing Company Ltd and the arrangements of the local authority’s governance of its wholly owned company be noted; and

2)   the outcome of the review and position appraisal of Rother DC Housing Company Ltd be reported to the Audit and Standards Committee at the next available opportunity.

(Councillor J. Barnes declared a Personal Interest in this matter as Vice-Chairman and Company Executive Director for Rother DC Housing Company Ltd. and in accordance with the Members’ Code of Conduct remained in the meeting during the consideration thereof).