Agenda item

To enable the Cabinet to consider and agree the preferred option relating to the future of the Company and to also note the decision of the Company Board in relation to the three Local Delivery Vehicles.

RESOLVED that Cabinet –

(a)    notes the decision of the North Essex Garden Communities Ltd Board on 6^th July 2020 to take all the necessary steps to wind up the three Local Delivery Vehicles, namely Colchester Braintree Borders Ltd, Tendring Colchester Borders Ltd and West of Braintree Ltd;

(b)    notes Colchester Borough Council’s disappointing decision not to approve their partnership contribution to the NEGC project and requests that the Leader of Tendring District Council formally write to Colchester Borough Council to express this Council’s concerns with regard to future working arrangements and seeking clarity around remedying their equal share of project responsibilities;

(c)    approves, as a Shareholder, that North Essex Garden Communities Ltd. ceases trading with effect from 31 August 2020; and

(d)   approves the necessary winding up procedures are undertaken, subject to the Leader of the Council, in consultation with the Section 151 Officer and the Monitoring Officer, being satisfied around the final accounting processes.

Councillors Stock and G V Guglielmi, as members of the Cabinet and therefore decision makers, each had earlier in the meeting declared a Personal Interest in Agenda Item 9 – report A.2 – North Essex Garden Communities Ltd. insofar as they were, respectively, a Director and an alternate Director of NEGC Ltd.

The Cabinet gave consideration to a report of the Leader of the Council (A.2) which enabled it to consider and agree the preferred option relating to the future of the Company and to note the decision of the Company Board in relation to the three Local Delivery Vehicles.

The Leader’s report set out for Cabinet the options for the future of the North Essex Garden Communities Ltd. and the three Local Delivery Vehicles (LDVs) following receipt of the Local Plan Inspector’s letter on 15 May 2020 and focused on the following points:

·           NEGC Ltd – its structure and purpose and company liabilities and resources;

·           Winding up the Company – the legal process;

·           Employment implications – pension strain and redundancy/TUPE implications; and the

·           Financial implications.

Cabinet was made aware that, on 6 July 2020, the North Essex Garden Communities Ltd Board, consisting of representatives from each of the North Essex Authorities (“the Councils”), had met to consider the current position and to agree the preferred options for the future of the Company and the three LDVs. At that meeting it was agreed that:

·           the Company would recommended to the shareholders to cease operations of NEGC Ltd on 31 August 2020 and thereafter begin activities to close the company down;

·           the Company would recommend to the shareholders to consider the closure of the three LDV companies in line with the NEGC Ltd closure; and

·           the Company would recommend to the shareholders to make the NEGC Managing Director post redundant as of 31 August 2020.

It was reported that the Councils had worked closely together to consider the options available to each of them as Shareholders, and, as a result of that action, the following options had been identified:

Option 1 – Braintree District Council would ‘exit’ and restructure to reflect an alternative purpose;

Option 2 – the Company continues to work on proposals for delivery models for the NEAs to decide upon, though this would require substantial ongoing financial contributions;

Option 3 – the NEAs remain within the Company, but restructure to make it fit for purpose, though this would require ongoing substantial financial contributions; and

Option 4 – Close the Company and three current LDVs.

Cabinet was informed that, following an evaluation of the current position, the options available and the issues identified within the Leader’s report, Option 4 was recommended as the preferred way forward for this Council. The reasons behind that recommendation were that:-

(1)    for the Company to carry on with a view to becoming part of the delivery vehicle would require a company restructure and substantive variations to both the Shareholder Agreements and the Articles;

(2)    the Company had not expressed any interest in progressing with its existing company structure, which included a LDV for the Tendring/Colchester Border Garden Community (TCB);

(3)    there were Value for Money considerations of continuing to use a limited company for the establishment of one Garden Community;

(4)    the TCB garden community could still be delivered through alternative mechanisms and vehicles, and Tendring District Council and Colchester Borough Council (CBC) would need to consider their options around this in due course;

(5)    the Company’s only liability and resource was the Managing Director. All project and external resources had been commissioned through CBC; and

(6)    there was a need to have careful consideration of the pension strain and TUPE implications, if the Company continued to trade with a view to establishing different delivery models.

Cabinet had had circulated to them prior to the commencement of the meeting an updated report of the Leader of the Council. The updated report informed Members that there was a project balance of £883k carried forward at the end of 2019/20 which had met operational costs incurred to date in 2020/21 with sufficient funding estimated to remain available to meet the winding up costs. Project funds were held by Colchester Borough Council (CBC), who effectively acted as the accountable body on behalf of the partnership. Any balance remaining would be carried forward for use in any future delivery vehicle or returned to local authorities as agreed between the partners.

Cabinet was aware that the cost of the project had been supported from its inception by a mix of Government funding and contributions from the four Local Authority shareholders. The contributions from the four Local Authorities had, to date, been based on each Local Authority accepting its equal share of the liabilities of the project. This position had been echoed in a letter required by CBC last year when they had sought the reaffirmation of this commitment from the other Local Authorities given their accountable body role.

The project budget for 2019/20 had therefore continued to be based on an equal share basis, with a contribution of £350k required from each of the Local Authority shareholders. The last tranche of TDC’s required contribution of £350k had been made in December 2019.

It was reported that CBC’s Cabinet had considered a similar report to the Leader’s report at its meeting held on 8 July 2020 and they had resolved to take all necessary steps to wind up North Essex Garden Communities Ltd. At the same meeting, they had also agreed a recommendation to their Full Council to release their 2019/20 contribution of £350k. However, unexpectedly at the meeting of CBC’s Full Council held on 15 July 2020, CBC Members had decided that they would not be paying their contribution of £350k in 2019/20. Notwithstanding the decision to make a contribution or not, the project was accruing costs and liabilities which should be fairly borne by the four authorities in accordance with the partnership arrangements that had been established to date.

Members were advised that, as the accountable body, it had been accepted that CBC would incur some costs and overheads as part of supporting the project. At the present time it was understood that those costs totalled £314k. As CBC were not looking to charge those costs into the project, it could be argued that their contribution was therefore an ‘in kind’ contribution rather than via a direct payment. Therefore in principle this could be an effective way of demonstrating that each of the four local authorities had made a fair contribution to the project costs, albeit not always as a cash payment. It was noted that Tendring had not charged any officer time to this project.

Cabinet was informed that, as part of winding up the company, there would be the need to bring the latest accounting period of NEGC Ltd to a close, with similar activities being required for the wider project, to not only enable any surplus to be considered but also as part of ‘cleanly’ moving onto the next phase of the TCB project. Therefore as part of those activities, further details would be sought from CBC in order to provide the necessary transparency around their ‘in kind’ contribution to the project, which had not been provided to date.

Members were made aware that this was important for a number of reasons not least because if the Council was left in the position of making contributions on behalf of another authority, it would be difficult to reconcile locally and it would potentially take money away from delivering other important priorities within this District such as tackling deprivation and key economic / regeneration projects.

Although CBC had made the decision to not make any further contributions, it was not yet clear whether they would be exploring further options around how they intended to meet any shortfall in their fair share of the accrued liabilities of the project.

Having considered the options and proposals available and the financial, legal and other implications set out in the Leader’s report (as updated), together with the implications of CBC’s decision:-

It was moved by Councillor Stock OBE, seconded by Councillor G V Guglielmi and:-

RESOLVED that Cabinet –

(a)    notes the decision of the North Essex Garden Communities Ltd Board on 6^th July 2020 to take all the necessary steps to wind up the three Local Delivery Vehicles, namely Colchester Braintree Borders Ltd, Tendring Colchester Borders Ltd and West of Braintree Ltd;

(b)    notes Colchester Borough Council’s disappointing decision not to approve their partnership contribution to the NEGC project and requests that the Leader of Tendring District Council formally write to Colchester Borough Council to express this Council’s concerns with regard to future working arrangements and seeking clarity around remedying their equal share of project responsibilities;

(c)    approves, as a Shareholder, that North Essex Garden Communities Ltd. ceases trading with effect from 31 August 2020; and

(d)   approves the necessary winding up procedures are undertaken, subject to the Leader of the Council, in consultation with the Section 151 Officer and the Monitoring Officer, being satisfied around the final accounting processes.