The Competition and Markets Authority (CMA) has published its final advice to help care homes understand their wider obligations to residents, and prospective residents, under consumer law.
Summer is finally here and so is our quarterly Company Secretary update!
In this update we cover topics including: corporate tax evasion offences, the government’s consultation on corporate governance and insolvency, this quarter’s key dates (yes, we do mention GDPR!) and, for our Welsh RSL clients, we highlight the consultation on the soon-to-be published Code of Governance from Community Housing Cymru.
We will also be reflecting on the importance of good governance when it comes to compliance with health and safety and, in particular, fire safety.
SPOTLIGHT: Regulatory compliance and good Governance
Health and safety compliance continues to be a key focus for both the Regulator of Social Housing (the Regulator) and Registered Providers of Social Housing (RPs) following on from the Grenfell tragedy last June. Many of our clients have been revising their health and safety policies and procedures (specifically regarding fire safety) to evidence clear reporting mechanisms and operational oversight.
In the wake of Grenfell, the Regulator wrote to all RPs to make it clear that their Boards “must ensure that they have proper oversight of all health and safety issues…”. Further, the Regulator’s letter emphasised that responsibility for ensuring compliance with the Home Standard remains with the Board and that “contracting out delivery of services does not contract out responsibility to meet the requirements of legislation or standards, so providers need systems to give boards assurance of compliance.”
Problems arise where Boards have become so distant from the operational spine of the organisation it becomes difficult for them to spot emerging risks until it is too late to manage them effectively. In these circumstances the Regulator has been quick to issue a governance downgrade to send a short, sharp message to the organisation and the wider sector. We have already seen the Regulator downgrade one RP to a G2 rating following a failure to implement clear policies and action plans dealing with, amongst other things, fire safety and asbestos management.
While some organisations have opted to elect a specific individual as a ‘responsible person’ accountable for health and safety compliance, Boards should be aware that they will be held collectively responsible for any breaches of the Regulatory Standards. It is, therefore, important to make a combined effort to manage the health and safety assurance framework within each organisation. Boards should actively interrogate and challenge information they are presented with, especially where it is unclear or inadequate.
We advise that Boards review their continuing development and training programmes to ensure that Board Members receive appropriate training on duties and responsibilities, in addition to specific responsibilities regarding health and safety, fire safety and other regulatory requirements. Please note that we offer fixed-fee training on Board Member duties and responsibilities on topical issues such as health and safety compliance. For further details, please contact a member of the team below.
Facilitating tax evasion – a corporate and criminal offence
Following the introduction of the Criminal Finances Act 2017, the liability arising from facilitating tax evasion (in the UK or overseas) now extends to organisations. The new offence captures the actions performed by ‘an associated person’, a wide net of people including any of the organisation’s agents, employees or service providers acting for or on their behalf. If an organisation is found guilty, it could result in an unlimited fine.
Companies must ensure there are ‘reasonable procedures’ in place to prevent the facilitation of tax evasion by anyone associated with the company. HMRC has issued six guiding principles organisations should consider when creating these procedures:
- risk assessment,
- proportionality of risk-based prevention procedures,
- top-level commitment,
- due diligence,
- communication (including training), and
- risk monitoring and review.
Further HMRC guidance can be accessed here.
It is important to note that risk assessments must be specific to the risk of facilitating tax evasion. Practically, your company should be reviewing the existing anti-bribery policies and incorporating necessary prevention measures; implementing a new or updated ‘tax evasion’ policy in line with HMRC’s guidance; reviewing employee/service provider contracts to include clauses addressing risks of facilitating tax evasion; providing training to staff and service providers, and introducing a nominated officer and implementing disciplinary processes for those engaging in this behaviour.
Consultation on corporate governance and insolvency
Following a number of reforms announced last year intended to strengthen the current corporate governance framework, the Government has conceded that there is still more work to be done to contribute to more robust and well-founded decision making in larger companies, particularly in the wake of Carillion’s collapse.
A report produced by the Work and Pensions and Business, Energy and Industrial Strategy committees reveals that days before being declared insolvent, Carillion paid out close to £3.9 million to a number of city firms. The report also highlighted that the company’s “incredibly poor standards made it difficult to identify information that should have been absolutely, straightforwardly available, such as a list of directors” and that “the chronic lack of accountability and professionalism now evident in Carillion’s governance were failures years in the making.” You can read the full report here.
The Government issued a consultation on 20 March 2018 seeking views on proposals to improve corporate governance for companies that are in or approaching insolvency. The consultation considers the following key areas:
- Sales of businesses in distress – including seeking to deter reckless sales;
- Reversal of value extraction schemes – including introducing powers to challenge transactions that are considered to have unfairly removed value from a company in the approach to insolvency;
- Investigation into the actions of directors of dissolved companies – including extending existing investigative powers into the conduct of directors to cover directors of dissolved companies;
- Strengthening corporate governance in pre-insolvency situations – this section considers areas of corporate governance law that may have increased importance when an organisation finds itself in financial difficulties, including areas such as group structures, shareholder responsibilities, payment of dividends, directors’ duties and the role of professional advisers, and protection for company supply chains in the event of insolvency.
Key dates and information
1 April 2018: the Regulator of Social Housing has revised its “Regulating the Standards” guidance as of April this year, taking into account updates in the Value for Money Standard and recent trends in RP grading. For more information click here.
16 May 2018: the deadline for ensuring your constitution reflects the changes required under 'The Regulation of Social Housing (Influence of Local Authorities) (England) Regulations 2017 (the Regulations) has now passed, and the Regulations will apply regardless of what is currently in your constitution. We advise that, if you haven’t done so already, you update your organisation’s constitution to reflect the Regulations to ensure transparency and compliance with the Governance and Financial Standard.
17 May 2018: the final ‘Independent Review of Building Regulations and Fire Safety’ report (the ‘Hackitt’ report) was published, please see our briefing here for further information.
25 May 2018: in case you missed it…the General Data Protection Regulations (GDPR) 2016/279 is finally in force. Make sure your data protection policies and consents procedures are up to date and take a look at our useful checklist here.
Oct 2018: Formal separation of Homes England and the Regulator of Social Housing is due to take place.
Welsh Housing: Community Housing Cymru to issue new Code of Governance
Community Housing Cymru (CHC) will publish a new Code of Governance (the Code) for Welsh Registered Social Landlords (RSLs) following an eight-week consultation.
The Code will move away from prescribing a checklist approach and will focus on key principles for boards to adopt in a way that is in keeping with its organisational culture. The seven core principles are as follows:
- organisational purpose;
- decision-making, risk and control;
- board effectiveness;
- diversity; and
- openness and accountability.
It is clear the Code is adapting to the realities of modern-day RSLs, which are becoming increasingly diversified in their activities and approaches. The need for strong leadership and good governance is at the heart of the Code. Stuart Ropke, Chief Executive of CHC, commented that the new Code demonstrates the aspirational ethos of the Welsh housing sector and that “the code will help boards and leadership teams to think more clearly and strategically about mission, purpose and structure. It will also assist the regulator as the judgement of good governance will be focussed on outcomes and culture and not solely compliance”.
For more information
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