Issue - meetings

To consider the attached report (C-008-2019/20).

(1)        The Cabinet approved the set-up of a group company structure as set out in 1.1 of the report.  This approval included a spend for the set-up costs to cover: legal advice, taxation advice, and project management support.  The District Development Fund (DDF) 19/20 would cover this sum.

(2)        The Cabinet approved the set-up costs as recommended in the report for the Services (Repairs) subsidiary company.  It was proposed to use the DDF to cover the initial set up costs.  This sum would include legal advice, tax advice, project management, and ICT consultancy costs.

(3)        The Cabinet delegated responsibility to the Officer/Member steering group to oversee the set-up and preparation of the Services (Repairs) company business plan for approval by the Group Company Holding Board. 

(4)        The Cabinet noted that if the set-up costs of the repairs company varied by more than an additional 20%, and/or if providing a loan to the Company the current locally agreed borrowing limits were exceeded by the Council, a further Cabinet approval would be required.

(5)        Cabinet noted that further approval would be sought for sale of land into the Development Company as and when sites came forward for development. 

The Business Support Portfolio Holder introduced report on the proposed setting up of a Group Company Structure.

The Interim Strategic Director and the appointed Consultant, Simon Smith, gave short presentations to the meeting on the proposed options. The Cabinet noted that the council was considering different ways to ensure the delivery of high-quality efficient services, as well as options to maximise the utilisation of council owned land and assets.  This set out how both could be achieved through a group company structure that enabled the subsidiary companies to provide: (i) a services company for repairs, (ii) a development company to facilitate the build of new homes and assets, and (iii) a local housing company for the long-term ownership and management of homes for rent or shared ownership.

It was proposed that the initial set up of the group company structure would be overseen by a Member/Officer steering group made up of five members.  Once the companies had been set up there would be a Board that took responsibility to oversee the performance of the subsidiary companies.  As these were wholly owned council companies the appointment of the Board would follow after the set-up of the company.  The shareholder agreement, memorandum of articles and intragroup agreements would set out the parameters and extent of decision making in the subsidiary companies.

The recommendations in the report sought to establish the set-up of the group company structure, and the services company for repairs.  The repairs company was the priority given that the current contractual arrangements would come to an end in March 2020.  The development company would progress as further work was undertaken on the feasibility of sites.  Any land transferred into the development company would require future cabinet approvals.

The Council’s Asset Management Strategy set out a range of different options for maximising the utilisation of council owned land and assets.  One of those options included the setting up of a group company structure that enabled the council to transfer land into the wholly owned council company for direct development.  In taking this approach the council would benefit from creating new assets that appreciated over time and generated long-term value.  This avoided the situation where land was sold to the private sector generating only a ‘one-off’ capital receipt to the council. Detailed feasibility studies would be undertaken before any activity by the development company was undertaken.  Each site that was transferred into the development company would require cabinet approval. This was a key driver for EFDC in supporting long term financial health and delivery of good quality services to residents across the district.

It was noted that many Councils across the country were taking this approach and successfully delivering new homes through a wholly owned group company structure. 

Asked what would be the democratic oversight for this project, such as transferring land to the development company, it was clarified that these would be cabinet decisions subject to the normal call-in procedures. There would also be clear articles of association between  ...  view the full minutes text for item 25