Agenda item

The Director of Finance and Executive Member for Finance and Governance submitted a report the purpose of which was to ask Council to approve updated documents setting out how Partnership Pensions Limited (‘Border to Coast’) was governed.

 

The Executive Member for Finance and Governance presented the report.

 

The report outlined that the main changes made to the Shareholder Agreement (SHA) included:

 

a)         Removing provisions relating to pre-establishment that are no longer relevant;

 

b)         Altering the proportion of Shareholders required for majority consent from 75% to 66.6%, which will continue to be in line with public procurement requirements for joint control of a company.

 

c)         Including provisions from a Supplemental Agreement executed on 6 October 2020. This amended the SHA to include additional provisions relating to when capital contribution calls may be made on the Partner Funds for expenses resulting from Border to Coast’s capacity as an authorised alternative investment fund manager (clauses 4.11 – 4.19). It should be noted that the original drafting from the Supplemental Agreement related to the Border to Coast Authorised Contractual Scheme; this has been extended to cover unregulated arrangements (such as limited partnerships);

 

d)         Amending the provisions relating to record keeping so it is not necessary for Partner Funds to use their powers to ensure Border to Coast maintains accounting and financial records. The company is responsible for ensuring compliance in this area (clause 6.8);

 

e)         Removing the requirement for Partner Funds to approve Border to Coast’s conflicts policy, as this is not necessary (clause 6.9);

 

f)          With respect to the provision of information to Shareholders, management accounts will now need to be provided within 90 days of the end of the quarter instead of 30. This provides greater flexibility for the Company which experience has shown would be useful (clause 14);

 

g)         Including a framework in a new schedule to the agreement with details of how a merger of two authorities may be managed (although allowing flexibility depending on the circumstances) (clause 15.3);

 

h)         Updates to the Reserved Matters which require unanimous Shareholder approval, including:

 

i)          Excluding agreements to provide services to Shareholders as customers approved under the Strategic Plan (Schedule 1 Part A paragraph 3);

 

ii)         Excluding amendments to the Articles required by a direct request from the Financial Conduct Authority (FCA) or following legal advice (it should be noted that a special resolution requiring the consent of 75% of the Shareholders will still be required) (Schedule 1 Part A paragraph 12);

 

iii)        Excluding the approval of the removal or appointment of interim directors (previously Schedule 1 Part A paragraph 15);

 

iv)        Excluding the requirement for consent to defend claims (although consent is still required to commence or settle any claims); and also excluding non-material claims of £1m or less (Schedule 1 Part A paragraph 15); and

 

v)         Excluding the formation of a subsidiary of Border to Coast if done in accordance with the Strategic Plan (Schedule 1 Part A paragraph 17).

 

i)          Updates to the Reserved Matters which require approval by Shareholder Majority (which is now 66.6%) including:

 

i)          Rather than approving the annual accounts of the Company, Shareholder Approval is required for any proposal not to table the accounts at the Company’s AGM (Schedule 1 Part B paragraph 5);

 

ii)         Excluding the need to determine directors’ remuneration, and instead approving a remuneration policy for directors (Schedule 1 Part B paragraph 6);

 

iii)        Excluding approval being required to amend a pension scheme for employees of the Company (Schedule 1 Part B paragraph 7);

 

iv)        Excluding entering into agency, distribution or similar agreements (previously Schedule 1 Part B paragraph 8);

 

v)         Increasing the threshold for leases requiring consent to £500,000 (from £100,000) (Schedule 1 Part B paragraph 9).

 

j)          Finally, the list of shared objectives in Schedule 2 has been amended to include the objective to primarily invest assets through the collective investment vehicle operated by Border to Coast, which was already recorded in the IAA.

 

It was highlighted that the above was not an exhaustive list and did not note typographical amendments or minor drafting changes.

 

The report also detailed minor updates to the Articles of Association, which included:

 

a)         Increasing the maximum number of directors from 8 to 10;

 

b)         Amending the required quorum for General Meetings of Shareholders to 66.6% to match the majority requirements that will now be set out in the SHA; and

 

c)         changes relating to the redeeming of class B shares in order to meet FCA regulatory requirements that in order for shares to qualify as Tier 1 regulatory capital, they must not be redeemable and cannot be reduced or repaid other than on liquidation

 

Following a vote, it was ORDERED as follows:

 

That the Council:

 

•           Agree to approve the revised Border to Coast Inter Authority Agreement attached at Appendix A to the report.

•           Agree to approve the revised Border to Coast Shareholder Agreement attached at Appendix B to the report.

•           Agree that approval of future amendments to the Border to Coast governance documents is delegated to the Pension Fund Committee.