Agenda item

The Committee noted that the Council had various existing interests in Companies, whether by way of sole or joint ownership. It was acknowledged that the Council must have robust and resilient governance arrangements in place. Such arrangements must enable the Council to have continuous oversight of financial interests, business cases and performance measures, to ensure continuous improvement and satisfaction of the Council’s best value duty and to comply with all regulatory requirements of Companies House. 

The existing governance arrangements had been reviewed and a number of recommendations for change had been set out in the report to the Committee to ensure that the shareholder had greater oversight of the Council’s interests in Companies, there was more frequent and transparent reporting, better officer support to the shareholder, and clearer lines of responsibility and accountability.

It was proposed that amendments be made to Part 3 (1) of the Constitution (Responsibility for Functions) to provide for the following principles regarding the responsibility for Council owned Companies:

·      The responsibility of representing the Council as a shareholder of each Council owned Company was an Executive function.

·      The Leader of the Council had determined to operate the shareholder role for each Council owned Company through the Executive Shareholder and Trustee Committee (ESTC).

·      Each Council owned company would have its objects set out in Articles of Association.

·      Each Council owned Company would enter into a Shareholder Agreement with the Council clarifying which matters were the responsibility of the Company Directors and which were reserved to the shareholder.

·      The ESTC would meet with each Company’s Directors, or representatives from the Board of Directors, at least bi-annually to monitor finance, performance and progress and determine any reserved matters.

·      The activities of the ESTC would be subject to consideration by the Overview & Scrutiny Committee (Resources).

·      The responsibility for the appointment of Directors to the Board of a Council owned Company to be set out in the Articles of the Company, and included in the shareholder agreement, but would usually be the responsibility of the ESTC.

·      The Directors owe a fiduciary duty and had to act in the best interests of the Company but were also accountable to the shareholder.

·      The Council and its Companies may contract with each other, subject to procurement matters, best value duty and a written legal agreement.

·      Arrangements must be in place to avoid conflicts of interest.

The report had also proposed amendments to the terms of reference of the full Council, the Leader/Executive and other committees as set out in Part 3 (2) of the Constitution to provide further resilience to the governance framework relating to the Council’s interests in Companies by strengthening and clarifying these provisions, full details of which were set out in the report.

Having considered the proposals, the Committee

RESOLVED: That full Council (8 October 2024) be recommended to approve the following:

(1)      the adoption into the Constitution of revised Parts 3(1) and 3(2), as set out in Appendices 2 and 4 to the report submitted to the Committee; and

(2)      the inclusion within the terms of reference of any proposed Audit Committee of internal audits of the Council’s companies.

Reasons:

·      It is considered that improvements can be made to the governance framework to ensure that GBC, as shareholder, has greater oversight of the Council’s interests in companies.

·      Good practice would be for the Council’s senior officers to monitor the performance of the Council’s interests in companies, and to bring forward reports to the shareholder in a regular, timely and transparent way with appropriate recommendations.

·      Whilst the shareholder function is exercised by the Leader as an Executive function, there is currently no mechanism in place for scrutiny of such executive decisions and good practice would be for the Council’s overview and scrutiny committees to provide effective scrutiny of the shareholder role.