Agenda item

Mr J Simmonds, Cabinet Member, Finance and Procurement, Mr R Gough, Cabinet Member, Business Strategy and Support, Mr A Wood, Acting Director of Finance and Mr G Wild, Director of Governance and Law have been invited to attend the meeting from 11.15am to answer Members’ questions on this item.

Mr K Pugh, Deputy Cabinet Member, Business Strategy and Support, Mr J Simmonds, Cabinet Member, Finance and Procurement, Miss S Carey, Deputy Cabinet Member, Finance and Procurement and Mr A Wood, Acting Director of Finance, were present for this item.

(1) Mr Simmonds explained that the protocol was prompted by the increasing number of KCC companies. He felt that the appendix which set out some detail of existing KCC companies could be more up to date, and the protocol was still in the early stages of development. Mr Simmonds explained that expert advice had been sought about the tax implications for the Council, and how the companies should be structured. Mr Wood explained that KCC-owned companies might have a good business case, but this might not be in the interest of the Council as a whole, and this was another reason for the development of the protocol.

(2) Mr Simmonds explained that, since the protocol was at the early stages of development, taking it through the Governance and Audit Committee would enable it to be further refined, and it would then be taken back to Cabinet. Mr Long, as Chairman of the Governance and Audit Committee, suggested that detailed discussion on the protocol could take place at the Trading Activities sub-group of Governance and Audit before it was brought to the full committee.

(3) The Chairman felt that it was not clear who was responsible for appointing a director, since there were references to directors being appointed by the Council, the Cabinet or a Cabinet Member. Mr Wood undertook to feed back this observation during the development of the protocol. In response to a question about what checks were carried out before directors of KCC companies were appointed, Mr Wood confirmed that some checks were carried out, but would find out more information.

(4) Referring to paragraph 4(e) of the protocol, the Chairman inquired why, given the fact that no Member or officer of the Council currently received income from a company, the protocol introduced that possibility. Mr Wood explained that there was not an intention to make any payments, but the paragraph would allow this to be done in specific circumstances. He stated he would be happy to remove this paragraph if required.

(5) Mr Manning inquired about the need for the protocol, what the aspirations for setting up separate companies were, and how the protocol related to how commercial companies operated in practice. Mr Simmonds explained that the protocol was designed to establish how the Council conducted itself in the corporate market, but some companies would involve other partners, and not all companies would be operating solely with a profit motive. There was also a need for the protocol where Directorates may have set up companies for a valid purpose, but these had financial implications, particularly in relation to tax, because they had not been considered corporately.

(6) Mr Pugh referred Members to a KCC document had been in existence since 2006 which incorporated the Companies Act 2006, which covered many of the questions that had been asked by Members. Mr Wood added that this document, which was referred to in paragraph 2 of the protocol, ‘Guidance on Local Authority Companies’, answered many of Mr Manning’s concerns.

(7) Mr Long inquired whether a company lawyer was involved in the drafting of the protocol, since he felt company law was very complex and it was important to have a specialist. Referring to paragraph 4(a) of the protocol, Mr Long expressed a concern that it may not be within the Council’s gift to insist that all KCC companies had their registered office at County Hall, since some of them were joint enterprises. Mr Wood explained that where KCC had a minority interest in a company it might be more difficult to persuade other parties to have a County Hall as the registered office, but this would be a matter for negotiation.

(8) A question was asked about the meaning of an ‘active dormant’ company, as referred to in the appendix. Mr Long indicated that this may be where a company is on the register of companies and not trading, and Mr Simmonds informed Members that there were instances where the Council had sought to protect the name of an existing KCC company.

(9) Referring to paragraph 19 about possible conflicts of interest, Mr Christie inquired as to what would happen in these cases.

(10) Paragraph 21 mentioned a specific legal obligation for Members and officers to report back their involvement in outside companies, and stated that this happened through the Trading Activities Sub-group. Mr Christie asked about the availability of the minutes of the Sub-group, and Mr Long informed Members that the minutes went on to the full Governance and Audit Committee.

(11) A Member expressed a concern that the appropriateness of KCC entering the marketplace, particularly where KCC may compete with Kent companies, had not been addressed in the protocol. Mr Simmonds explained that a review of KCC companies and their relationship with the Council had been carried out by an outside body. The Chairman also referred Members to the earlier discussion where the business cases of each company would be considered in the context of the Council as a whole, and Mr Long informed Members that all business cases of existing companies had been scrutinised by the Governance and Audit Committee.

RESOLVED: that the Cabinet Scrutiny Committee:

(12) Thank Mr Pugh. Mr Simmonds, Miss Carey and Mr Wood for attending the meeting and answering Members’ questions.

(13) Welcome the preparation of the KCC Companies protocol and note that it will be going to the Governance and Audit Committee for approval.

(14) Ask that the Acting Director of Finance provide more detail on the checks that are carried out before directors of KCC Companies are appointed.