Minutes:
Executive’s approval was sought of the Group Shareholder Agreement between Dragonfly Development Ltd, Dragonfly Management Ltd and the Council.
On 1st February 2023, Council approved the full Business Case for the development of the wholly owned company including the recommended business and governance model.
In order to progress the governance arrangements required, it was necessary to agree and adopt a Shareholder Agreement and Articles of Association.
The Shareholder Agreement was attached at Appendix 1 to the report and set out the governance arrangements, delegated functions and decision-making structure. It was a document that regulated the relationship between the companies and the Council as sole shareholder, the management of the company and the protection of the Council as shareholder. It was essential to satisfy the Council’s external auditors who required the Council to ensure appropriate governance, due diligence and robust decision-making was in place.
The Shareholder Agreement had been designed so that there would be robust processes in place with appropriate financial controls. Despite these processes and controls, the companies would still be able to undertake the work that they were set up to do.
Of particular note were the Reserved Matters at Schedule 1 of the Agreement. These were referred to in the Business Case and were discussed at the briefing session in January. They were matters that the companies could make a decision on without the consent of the Council. Most of the Reserved Matters were generic to shareholder agreements of this nature. Of these, Members needed to be especially aware of those matters relating to the Business Plan. Clause 2 of the Agreement required the companies to prepare a Business Plan for the coming year which would set out the operational business plan and budget of the companies. The Business Plans were to be presented to the Council and only adopted or amended by the companies following approval by the Council in accordance with Reserved Matter number 9. Further, if the companies wished to act outside of the approved Business Plan they could only do so with the consent of the Council in accordance with Reserved Matter number 10. These controls enabled the Council to have influence on the strategic direction and development of the companies but without impacting on their day to day operation.
The Chief Executive advised Members of two amendments which were necessary to the Shareholder Agreement;
1 - Page 2 of Shareholder Agreement;
Boards means the DDL
Board and the DDM DML Board (and Board means any one of them).
2 - Page 24 of Shareholder Agreement, at number 30;
Entering into or varying any contract of employment providing
for the payment of remuneration (including pension and other
benefits) of staff in a managerial position in excess of a rate
equivalent to spinal point 29 (Grade 10) of Chief Officer (or equivalent) position
on the Council’s pay
scales or increasing the remuneration of staff in a managerial
position (including pension and other
benefits)to a rate in excess of the
rate in spinal point 29 (Grade 10) of the Council’s pay
scales to a rate equivalent
or in excess of the rate of Chief Officer grades of the
Council’s pay scales. For the benefit of doubt, this includes
staff at Assistant Director, Director or
Chief Executive grades (or equivalent).
In response to a query from the Portfolio Holder for Finance in relation to paragraph 5.5.1 of the Shareholder Agreement, the Chief Executive clarified that if a Councillor who was a Director on the Board ceased to be a Councillor, then they would be removed from the Board within two months of them ceasing to be a Councillor unless they had a skill set or experience that was an asset to the Board, then it would be at the Council’s discretion whether to keep them on the Board as a Non-Executive Director, but a Director that was no longer a Member of Council.
The Chief Executive also informed the meeting that DML had now been set up with Companies House formally. However, due to another DML already in existence as a company nationally, the Council’s Dragonfly Management Ltd would need to be called Dragonfly Management (Bolsover) Ltd.
The Chief Executive added that the staff consultation had come to an end and almost 100 staff had been transferred from the Council’s employment into Dragonfly Development Ltd employment. However, three members of staff that would not transfer to Dragonfly due to their roles being more suited to the Council were the Voids Coordinator, the Quantity Surveyor and the Valuation Officer.
Moved by Councillor Duncan McGregor and seconded by Councillor Sandra Peake
RESOLVED that (1) subject to the amendments below, the Shareholder Agreement between Dragonfly Development Ltd, Dragonfly Management Ltd and the Council, be approved,
1 - Page 2 of Shareholder Agreement;
Boards means the DDL
Board and the DDM DML Board (and Board means any one of them).
2 - Page 24 of Shareholder Agreement, at number 30;
Entering into or varying any contract of employment providing
for the payment of remuneration (including pension and other
benefits) of staff in a managerial position in excess of a rate
equivalent to spinal point 29 (Grade 10) of Chief Officer (or equivalent) position
on the Council’s pay
scales or increasing the remuneration of staff in a managerial
position (including pension and other
benefits)to a rate in excess of the
rate in spinal point 29 (Grade 10) of the Council’s pay
scales to a rate equivalent
or in excess of the rate of Chief Officer grades of the
Council’s pay scales. For the benefit of doubt, this includes
staff at Assistant Director, Director or
Chief Executive grades (or equivalent).
(2) delegated power be given to the Chief Executive Officer to make minor changes to the Shareholder Agreement.
Reasons for Recommendation
It was essential the Council had a Shareholder Agreement in place to ensure the appropriate governance arrangements were developed and maintained for the Dragonfly Group.
Alternative Options and Reasons for Rejection
Although it was not a legal requirement for the Council to have a Shareholder Agreement for the wholly owned company it was advisable to have one for the good governance reason. The absence of a shareholders agreement opened up the potential for disputes between the companies and the shareholder. It would also limit the ability to monitor the companies and influence their strategic direction. Further, the need for a Shareholder Agreement was stated within the Business Case and forms part of the basis for the Council’s decision on 1st February 2023. Therefore the alternative of not having one is rejected.