1. David Alcock Wednesday 12 th February 2014 Somerleyton Road project Stewardship options

2. Who’s he?  Anthony Collins Solicitors – based in Birmingham, working all over England and Wales  Leaders in working in the “space” between the public, private and third sectors and in social housing  Significant involvement in working with community enterprises, work with Locality, development trusts, TMOs, community land trusts  Also working with social enterprises and co-operatives

3. What kind of organisation should the stewardship body be?

4. Stewardship bodies…  “Spectrum” of possibilities  Key issues:  Contract mechanism / funding  Ownership of assets  Management Managing agentCommunity land trust

5. Implications  “Managing” agent type role  Usually funded under one main contract  Commissioning body retains assets  If manager does a bad job, can easily be removed  “CLT” type role  Stewardship body holds assets  Usually funded by income from those assets  No “commissioning” body as such – stakeholders  Different mechanisms for dealing with performance

6. Options under consideration  Option 1: Council retains assets  Council keeps assets, gets rental stream income  Council has contract with stewardship body  Council pays stewardship body to carry out specific management role under a contract  Option 2: mixed economy?  Council transfers some assets, retains rental stream income  Council still has contract with stewardship body  Council pays stewardship body to carry out some functions, other work carried out direct from own income stream

7. Options under consideration  Option 3: independent role  Council transfers assets  Stewardship body gets all income from assets / rental income transfer, makes payments to Council to service Council debt  Stewardship body carries out role independently  Stewardship body either:  needs a contractual relationship with Council to rely on Council ability to borrow; or  sources borrowing independently  What is the best option?

8. How will decisions be made?

9. Governance  What do we mean by governance? “the framework of rules and practices by which an organisation ensures accountability, fairness and transparency…”  What we do together and how we do it

10. All types of body  Will have a two level structure:  Members  and a Board  Will be regulated under either the IPSA 1965 or the Companies Act 2006 and other Acts of Parliament  Will be accountable  To the members  To the Financial Conduct Authority / Companies House

11. Membership  Not day to day running  The “owners”  Key decisions only – changing the name, changing the rules, appointing the board  In the long term, the key stakeholders will be:  The Council  Tenants in the residential properties  Occupiers of the non residential properties  The wider local community

12. The Board  Responsible for strategy and policy  Accountable for the body  Not necessarily “do-ers”  Possibly appointed by:  The Council  Residents  Non residential occupiers  The wider community  Small number co-optees

13. Issues to consider  Balance of interests  Range of stakeholders  Duties of directors – not a “representative” function

14. Legal structures

15. What are the options? Profit distributing structures:  Companies limited by shares  Including PLCs  Limited Liability Partnerships  Co-operative Societies  Community interest company ltd by shares

16. What are the options? Non profit distributing structures:  Companies limited by guarantee  Community Benefit Societies  Community interest company limited by guarantee  CIO

17. Don’t worry about labels  “Social Enterprise”  “Community Development Trust”  “Community Enterprise”  … don’t worry too much!  Basic options the same

18. Company Limited by Guarantee  Common vehicle for non-profit making organisations  No shares; Members give £1 “guarantee”  Still gives limited liability  Can be a charity or a CIC

19. Community Interest Companies  Introduced as legal form for social enterprise  CIC registration: CIC regulator  “Community benefit”  Annual Community Interest Report  Standard/required provisions in M&A  Asset lock  No tax breaks

20. Community Interest Company  Community Interest Test ( s35(2) Companies Audit, Investigations and Community Enterprise) Act 2004  “A company satisfies the community interest test if a reasonable person might consider that its activities are being carried on for the benefit of the community or a section of the community”

21. Co-operative Societies  For the benefit of those who join as a member  Democratic structure – one member, one vote  Members hold a share in the Co-op  Regulated by Financial Conduct Authority (FCA)

22. Community Benefit Societies  Set up to benefit the wider community, not just members  Democratic structure  Members own a share  Can have asset lock, similar to CIC asset lock  Can be charitable  Generally higher set up costs than companies  NB community investment – some useful key features

23. Charitable Status  In order to be charitable, an organisation must be “established for charitable purposes”  “Charitable purposes” means purposes which are “exclusively charitable according to the law of England and Wales”  13 listed in the Act but a wide range in practice Charities Act 2011

24. Charitable Status  Some social enterprises are charities  Some helpful charitable purposes:  Urban or rural regeneration  Community capacity building  Facilities for recreation  Health warning – Charity Commission guidance!  But what about activities?

25. Charitable Status  Tax treatment different to normal companies  Exempt from most forms of Corporation Tax  Other tax advantages  Access to sources of funding  Restrictions on trading  Regulation by Charity Commission  “Burning the bridge”

26. Community Investment  Some important features of Community Benefit Societies and Co-operatives:  One member one vote (however many shares)  Withdrawable share capital  (Soon) £100,000 investment limit for individual members  And therefore, exemption from some FCA regulations in relation to share issues

27. Tenancy issues  Key issue – keeping rented properties that way, preventing speculation / buy to let  Co-operative tenancies exempt from right to buy  Can only be issued by fully mutual housing co-operatives  Which means that:  Only tenants can be members  Only members can be tenants  One or many

28. Discussions to date  Not profit distributing to members  Probably could be charitable – but should it be? (NB some tax advantages)  How much flexibility?  What can the stakeholders live with?  What about raising funds from the community (community share issue)?

29. The role of the new body

30. Phases of the development  Phase 1: preparation – this is where we are now  Design  Planning permission  Procurement  Sorting out!  Phase 2: development  Land assembly  Build phase  completion  Phase 3: stewardship

31. Phase 1  Led by the Council  Working with steering group  Role of new body  No role – not needed yet?  Informal input?  Formal input?  Significant role?

32. Phase 1I  Led by the Council?  Working with steering group  Role of new body  What about collateral warranties?  When is best time for land to transfer?  Links back to question of what will stewardship body “be”

33. Tax  Advantages to charitable status for new body  VAT on development shouldn’t be huge issue due to Council’s privileged VAT status…  …but take more advice when overall contract structure clearer

34. Thanks for listening and joining in! David Alcock Wednesday 12 th February 2014 david.alcock@anthonycollins.com 0121 212 7431