Agenda item

Report of the Director of Corporate Services (DSFRA/17/23) attached.

(Councillor Saywell declared a personal, non-pecuniary interest in this matter [by virtue of his being an Authority-appointed non-executive director on the Board of Red One Ltd.] and took no part in any voting thereon.).

The Authority considered a report of the Director of Corporate Services (DSFRA/17/23) on further legal advice obtained in relation to commercial trading models available to local authorities such as the Devon & Somerset Fire & Rescue Authority.

At an Extraordinary General Meeting of Red One Ltd. (“the Company”) held on 4 April 2017, the Authority (as sole shareholder in the Company) had resolved that a community interest company (CIC) limited by guarantee be established and that, once established, all current contracts, liabilities, assets and resources (including staff) of the current Red One Ltd. be transferred to the new company.  The Authority had been advised at its ordinary meeting on 12 June 2017 that, acting on this resolution, the Company Board had established and incorporated a community interest company with three “members” (equivalent to shareholders) albeit in a personal capacity and not as Authority Members (Minute DSFRA/17 refers).

The ongoing work to fully establish the new CIC, however, had highlighted that the Authority could only exercise commercial trading functions through a company which it either controlled or was subject to its influence.  This meant that perceived greater freedom to trade through the new CIC was not valid.  In addition, it had been confirmed that, contrary to the understanding of the Company Board, there were no corporation taxation advantages to be derived through the CIC model. 

In light of this further advice, the Company Board had decided that, while it remained committed to transitioning to a CIC, it was unable to execute the instruction given to it following the Authority meeting on 4 April 2017 (including transfer of Red One Ltd. assets) until a new operating model was developed in accordance with all applicable legislation and supported by a detailed business case, to be presented to the Authority (as shareholder) for approval at a future meeting.  This Board decision was set out in a revised recommendation (a) to report DSFRA/17/23, circulated by the Clerk to the meeting.

Report DSFRA/17/23 also invited the Authority to consider whether, in noting the decision of the Board, it might also wish – as sole shareholder and to ensure certainty and clarity – to pass a special resolution (in accordance with Article 4 of the Company’s Articles of Association) directing the Company not to transfer any Red One Ltd. contracts, liabilities, assets and resources (including staff) from the Company to any new company.

In debating this aspect, some Members expressed the view that it might be appropriate to defer consideration of this pending the opportunity to receive representations from the two Authority-appointed non-executive directors to the Company Board who were unable to attend this this meeting.  Other Members considered, however, that such a special resolution did not prevent establishment of a CIC and the subsequent transfer of assets at a future date (subject to the CIC established complying with relevant legislation) but instead provided clarity and certainty given the current position.

Following the debate, Councillor Ellery MOVED, with Councillor Greenslade seconding:

“that the revised recommendation (a) as circulated at the meeting be accepted, but that a decision on recommendation (b) (dealing with a special resolution directing the Board of Red One Ltd. not to transfer company assets etc.) be deferred”

Councillor Wheeler then moved, with Councillor Burridge-Clayton seconding an AMENDMENT to the above motion:

“that the revised recommendation (a) as circulated at the meeting be accepted and that recommendations (b) and (c) as printed in report DSFRA/17/23 be approved.”

The amendment was then put to the vote and declared CARRIED, by 15 votes for to 4 against. 

The amendment, as carried, was then put to the Authority as a substantive motion whereupon it was

RESOLVED

(a).      that, given further legal and tax advice recently obtained and set out in paragraphs 2.2 to 2.5 of report DSFRA/17/23, the Authority note the following decision of the Board of Directors of Red One Ltd.:  The Board remains committed to transitioning to a Community Interest Company (CIC) but is unable to execute the instruction given to it by the Authority at the meeting on 4 April 2017, including transfer of Red One assets, until a new operating model has been developed in accordance with all applicable legislation and supported by a detailed business case, which will be presented to the shareholder for approval at a future meeting;

(b).      that, in noting the decision of the Board as set out at (a) above, the Authority, for the purposes of certainty and clarity, resolves:

                      i.        to pass (as sole shareholder in Red One Ltd.) a special resolution in accordance with Article 4 of the Company’s Articles of Association directing the Company not to transfer any Red One Ltd. contracts, liabilities, assets or resources (including staff) from the Company to any new company; and

                     ii.        to authorise the Clerk to the Authority to notify, formally and in writing, the Company of this special resolution;

(c).      that, subject to (a) and (b) above, the report be noted.

(At this point [11.30hours] the meeting was adjourned for fifteen minutes, reconvening at 11.45hours).