That Cabinet:

1.    Noted the Chief Executive’s proposed changes to the Councils senior management structure.

2.    Approved the Governance structure and arrangements described in section 6 of this Report.

3.    Agreed to delegate to the Leader, after consultation with the Chief Executive, the appointment of the Council’s officer nominees to represent the Council on the three JVLLP boards.

4.    Agreed to delegate to the Leader, after consultation with the Chief Executive, any future changes to the appointment of nominees to represent the Council on the JVLLP boards or as its directors on the Mercury Land Holdings Limited board.

5.    Agreed to indemnify its nominees to the JV LLP Boards (once the JVLLPs are set up) and the directors of Mercury Land Holdings Limited under the Local Authorities (Indemnities for Members and Officers) Order 2004.

6.    Noted the budget implications of these changes as detailed in section 10 of this report, and that they are reflected in the Council Medium Term Financial Strategy for agreement in the February Council Tax setting meetings.

Councillor Roger Ramsey, Leader of the Council, presented the report

It was reported that the Council is embarking on an ambitious regeneration programme, and is likely to enter into three joint ventures (“JV”) with private sector partners (which were the subject of Cabinet papers and approvals in November and December 2017), and a further paper to this January 2018 Cabinet.

It was reported also that the Council has a wholly-owned development company, Mercury Land Holdings Ltd, which has its own extensive development programme. This paper provides a context for the overall programme, sets out the cumulative governance implications for the Council, identifies key issues to be considered and recommends a governance structure to ensure that the Council’s best interests are protected.

Reasons for the decision:

By entering into joint ventures with the private sector the Council is able to harness the commercial expertise of an experienced partner and participate in the risks and rewards of property development. By appointing the proposed nominees to the JV LLP Boards, the Council can best seek to avoid the risk of accusations of pre-determination and bias when exercising decision-making as the Council. The nominees proposed have the necessary skills and seniority to act as Council nominees. However, if any of these officers are, for whatever reason, conflicted from making decisions in their capacity as officers, the Council is still able to rely on other suitably skilled officers to report and make recommendations. Moreover, these nominees ensure that the Client-side function is carried out by other senior officers.

The establishment of a Client Board will ensure that the Council’s interests are protected, and that there is an effective interface between the JV LLPS (and MLH) and the Council, including where reserved or consent matters require decision. The Client Board will also ensure that the nominees and directors are properly supported and equipped to reflect the Council’s position and make decisions when attending Board meetings.

The Regeneration Board will ensure that the Council has an ability to oversee and influence the strategic direction of its programme of regeneration, whether via the JV LLPS, MLH or through other projects. This will also mean that matters referred to Cabinet for decision, have had detailed prior scrutiny and that the overall synergies between each of the regeneration initiatives are being taken into account.

Other options considered

There are other permutations possible but certain factors which remain constant, namely:

·         The Council has the right to appoint nominees to the Boards of each of the three JV LLPs and if it failed to do so would be allowing the private sector partner to run these businesses without Council input. Therefore, under any model, these appointments need to be made;

·         Likewise, MLH would be incapable of operating as a business without a Board of Directors;

·         The nominees and directors need to have the necessary skills and support to perform their duties;

·         The Council nominees and directors will have obligation to act in the best interest of the business they serve and to declare conflicts of interest;

·         A conflict of interest could require certain officers and elected members with responsibilities inside the Council not to take part in a decision being made by the Council;

·         At all times the Council must manage its position so as to avoid legal challenge based on “bias and predetermination”.

For that reason, the options considered but discounted are:

i.              Structures in which there is no clear distinction between officer/member functions as nominee/director on the one hand, and as Council decision-maker on the other; by way of simple example, a MLH Director should not be considering and approving a planning application to be submitted by MLH and then acting as the reporting officer recommending the grant of that permission.

ii.            Structures in which there is no adequate or properly resourced clientside function to enable arms-length engagement with the JV LLPs or MLH, and to support to the Council nominees/directors;

iii.           Structures in which there is no forum for regular and meaningful reporting to elected members and opportunity for dialogue on strategic matters;

iv.           Structures which fail to recognise and address the levels at which decisions should be made by the Council, balancing the need for timely decision-making with the need for decisions to be taken after the right degree of scrutiny and detailed assessment.

Consideration has also been given to whether Mercury Land Holdings should act as the Council’s holding company and whether it should enter into the JV partnerships on the Council’s behalf. It is considered however that given MLH is an arms-length company with its own board (as opposed to a shell company), this would create a complex structure and would dilute the Council’s ability to participate directly in decision-making within the joint ventures. It is therefore proposed that the Council should itself enter into the joint venture partnerships.

That Cabinet:

1.    Noted the Chief Executive’s proposed changes to the Councils senior management structure.

2.    Approved the Governance structure and arrangements described in section 6 of this Report.

3.    Agreed to delegate to the Leader, after consultation with the Chief Executive, the appointment of the Council’s officer nominees to represent the Council on the three JVLLP boards.

4.    Agreed to delegate to the Leader, after consultation with the Chief Executive, any future changes to the appointment of nominees to represent the Council on the JVLLP boards or as its directors on the Mercury Land Holdings Limited board.

5.    Agreed to indemnify its nominees to the JV LLP Boards (once the JVLLPs are set up) and the directors of Mercury Land Holdings Limited under the Local Authorities (Indemnities for Members and Officers) Order 2004.

6.    Noted the budget implications of these changes as detailed in section 10 of this report, and that they are reflected in the Council Medium Term Financial Strategy for agreement in the February Council Tax setting meetings.