Agenda item

Proposal for a Local Authority Trading Company


The Cabinet were presented with a proposal for the establishment of a Local Authority Trading company (the Holding company). Their approval was sought:


·         For the establishment of a Local Authority Trading company (with Subsidiaries to follow).

·         In principle of the draft Business Case template, which will be used to seek approval for creation of future trading subsidiaries of the Holding company, and to outline the activities of those subsidiary companies.

·         In principle to amend the Council’s Constitution and Contract Procedure rules to ensure that the Council continues to have robust contract management arrangements in place.


The Director (Corporate Services) guided Members through the report explaining in depth each of the following sections:


·         Financial Background to the establishment of the LATCo.

·         The Council’s key objectives and long-term ambitions for the LATCo.

·         Governance Arrangements and Operating Model.

·         Governance Operating Model (The Holding Company, Shareholder Group, Cabinet, Overview Scrutiny and Full Council).

·         The Proposed Company Structure.

·         An Overview of the Company’s Articles of Association.

·         Next Steps for the Formation of the LATCo.


Before opening up the item for questions, the Chair made the following points to Members:


·         The recommendations outlined that Cabinet will only be making recommendations to Full Council rather than making any decisions itself; the item will be submitted to Full Council allowing all Members to have their voices heard in the decision making process. As a result of the decision being made by Full Council, it cannot be called into the Overview Scrutiny Committee.

·         Shareholder Group, page 9 – It was the Chairs intention that the suggested Membership of the Shareholder Group will include a co-opted member from the Council’s Workers Union. Additionally, although not a requirement, the Chair of the Overview Scrutiny Committee will be included as a non-voting Member of the group, subject to the views of Cabinet and Full Council.

·         Paragraph 5.2, page 10 – The current Cabinet was set up in May 2019 in anticipation of the LATCo being formed with the aim being that Cllr Lenny Rolles, Cabinet Member for Commercial Services, will act as Chairman of the LATCo Parent Company Board. If any conflicts of interests between the Portfolio and the operations of the Board arose then the Leader would take on the Cabinet Members services in order to allow Cllr Rolles to concentrate on his independent position as Chairman of the Parent Company Board.

·         Paragraph 6.2, page 11 – There was no legal requirement, but it was the Chairs intention to replicate political balance on the LATCo Board; the three available Member positions on the Board will be filled with two Labour Councillors and one Conservative Councillor so that there would be representation from the principal opposition group.


The Chief Executive added that Local Authority Trading Companies were well established throughout Local Government and explained to Members of instances where senior officers and Councillor’s had fallen afoul of the Governance Arrangements resulting in the loss of their jobs. However, he reassured the Committee that the report was of an excellent standard with clearly set out Governance Arrangements and he was in total agreement with everything that was being proposed.


The Director (Corporate Services) and the Assistant Director (Corporate Services) fielded questions from the Cabinet and explained that:


·         The difference between the Parent Holding Company and the subsidiary companies was that the Parent Holding Company owned all of the subsidiary companies and didn’t carry out any delivering of the services. Whereas the subsidiary companies were all operational and delivered all of the services to fulfil their functions.

·         The ‘golden vote’ was the power the Chair possessed to decide a matter of the Holding Company should the need ever arise.

·         Referencing paragraph 6.1, Council officers were able to occupy those roles on the Board and fulfil the duties to the Council in their Council employed positions. The officers would have a duty to the Council first and would be deployed under secondment to that company structure. Any conflicts of interest would be managed if and when they occurred.

·         The guidance stated that the Chairs of the subsidiary companies should be officers; as those subsidiary companies did not have the same level of power wielded by the Parent Company and were more operational in nature, the Council felt that it would be more beneficial to have officers as the Chairs to allow the companies to fulfil their commercial objectives. The Chairs won’t have voting rights on the Parent Board otherwise that would dilute the balance on the Parent Company between Members and officers, but this could be reviewed in due course should the Council wish to 

·         It has been agreed that the Company Secretary role will be filled by the Monitoring Officer, Perry Holmes.


The Head of Shared Legal Services and the Lawyer – Medway Council fielded questions and explained that:


·         The indemnity cover only applied if the relevant parties had acted honestly and in good faith.

·         The process for dismissal of Directors from the Parent Company Board was laid out in the shareholders agreement, the articles of association and elements of it were also captured in the Directors terms of engagement. As a result of such in depth guidance, it should not be a surprise to any of the Directors that the Leader was able to reserve the right to dismiss immediately in the right circumstances.

·         A programme will be pre-set and continually monitored to ensure that no officers are required to have their employment transferred to the Company under TUPE.

·         It was completely possible for multiple business structures to operate within the framework; a remit is set by the Parent Company that allows multi-functionality.


The Chief Executive elaborated further on the monitoring of officers working in the LATCo:


·         The officers involved with the LATCo will provide their services which will amount to a relatively small proportion of time and that therefore raises less concern with TUPE

·         If however, the workload increased and took the officers further way from their Council work creating an unsustainable balance then a future option could be for the LATCo to potentially employ the officers required.


The Communications Manager explained to the Cabinet that he had held meetings with officers ahead of arranging a meeting with the Leader and Cllr Rolles to discuss a marketing plan for the LATCo once it had been adopted by Full Council.


The Leader and each of the Cabinet Members thanked the officers personally for all of their hard work in creating the report which was concise, detailed and of a very high standard. 


Resolved that Cabinet recommended to Full Council:


1.         The formation of the Local Authority Trading company (LATCo) Holding company as detailed in the report and recommend the report is considered by Full Council at its meeting on 17 December 2019.


2.         That the Council reserves the right to be a shareholder of any LATCo subsidiary and this shall be included in any governance agreement between the Council and LATCo (through the Memorandum of Association (MOA)).


3.         That delegated authority is given to the Chief Executive, in consultation with the Leader of the Executive, the Monitoring Officer and the Section 151 Officer to confirm and register the name of the company and take all necessary practical, legal and financial actions necessary in relation to the creation of the LATCo and development of the relevant governance framework in order to enable the effective operation of that company and associated subsidiaries and subject to any necessary amendments to the Council’s Constitution being brought back to Full Council for approval.


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