Company Secretary Snapshot - March 2023

Welcome to our snapshot of key changes and current affairs for Company Secretaries working in social housing.

As the financial year draws to a close, this month we’re looking at the draft Directions for the Regulator of Social Housing (RSH), the latest developments with consumer regulation, progress in women leadership in the UK’s biggest companies and more!

Revised Directions to RSH: Tenant Involvement and Mutual Exchange

The Government has recently completed a consultation on proposed new directions to the RSH. It is proposed that the revised Directions will require the RSH to:

(a) revoke the ‘Tenant involvement and empowerment’ and ’Mutual exchange’ paragraphs of the Directions on Regulatory Standards made by the Secretary of State on 1 March 2012; and

(b) direct the RSH to set revised regulatory standards (and the content of those standards) on tenant involvement and mutual exchange, and to have regard to specified objectives when setting the tenant involvement standard.

The new directions aim to be outcome-based rather than prescriptive where possible, and will apply to all registered providers of social housing (RPs).

The new proposed directions include provisions for RPs to:

1. Consider tenants’ views when making decisions relating to housing management. It also includes a strengthened requirement for RPs to offer tenants “a wide range of meaningful opportunities” to get involved in matters related to their housing.
2. Ensure that the tenant voice is heard in all parts of the organisation. This will require RPs to give tenants the opportunity to scrutinise strategies, policies and services, as well as any new services being introduced.
3. Take reasonable steps to help tenants who want to set up tenant-led influencing and scrutiny activities.
4. Offer support to meet the diverse needs of tenants who might otherwise struggle to engage with involvement activities.
5. Make clear that shared owners are included in tenant involvement.

The content of the Directions is not unexpected as this has been heavily trailed by the various publications around the revised consumer standards over the last few years. However, they still mark a shift from the current Tenant Involvement and Empowerment Standard; organisations should look at the content of the Directions when considering what steps they will need to take in due course. We will report further on the outcomes of the consultation and the final drafting of the Directions when they become clear.

Value for Money metrics – a governance take-away

The RSH has published its ‘Value for money metrics and reporting 2022’. RPs are required to report each year on their performance against a number of “value for money” measures set by the RSH. The report highlights the importance of RPs delivering value for money, by making the best use of their resources to achieve their objectives.

The RSH’s report found that half the sector’s headline costs in 2022 related to spending on maintenance and major repairs – just one indication of the financial pressures faced by RPs highlighted in the report. A particularly governance take-away in the report is the emphasis on the importance of RPs being transparent about value for money including through being open with stakeholders (e.g. tenants and investors) when reporting on decision-making and performance.

In our experience, value for money can still be a bit of a ‘tick box’ in governance frameworks and reporting, so this is one to analyse and think about on a more meaningful basis – linked to the above Directions relating to tenant involvement, think about how you could enshrine aspects into your engagement with residents beyond the ‘usual’ housing management issues.

Women leaders in FTSE companies

The FTSE Women Leaders Review is the UK’s independent, voluntary and business-led initiative supported by Government, aimed at increasing the representation of women on FTSE 350 Boards and in their Leadership teams. The review has published its second report and, for the first time, data from the top 50 largest private companies (i.e. outside of the FTSE 350) has been included.

The report outlines the progress on the key recommendations that were set last year:

1. To maintain gender balance over time, and provide a degree of flexibility, companies should aim to maintain the representation of both men and of women at, or above a minimum 40% threshold. The year on year progress achieved in the UK over a short period of time, and the strong pipeline of experienced, capable women, is evidence that a more ambitious target than 33% could be met. The 40% target was met for women on the FTSE 350 Boards in January 2023.
2. All companies should increase their efforts to understand and remove bias from the selection process on Board and Leadership appointments. There has been an increased in the number of women in FTSE 350 Chair and SIF roles since 2017, with women occupying around 16% of Chair roles and 38% of the Senior Independent Director roles in 2022. The number of women financial directors currently stands at 19% and women in a Chief Executive role remain few and far between, with little progress in the last decade. However, women now make up 40% of FTSE 350 board members, many having served on several boards and for a number of years. Given this ever-strengthening ‘pipeline’ of experienced women, it was anticipated that more would have been appointed into the four key roles than is currently the case.
3. FTSE 350 Boards consisting of below 33% women, should look to the underrepresented gender when considering additional appointments. Almost two-thirds of FTSE 350 Boards have stepped up in the last decade with 91% having met, or exceeded the 33% target in 2022. However, many boards still have a long way to go to achieve the 40% target by 2025.

Filing resolutions at Companies House

Under the Companies Act 2006, a company is required to submit a copy of a resolution to Companies House in order to comply with the several different filing obligations. It has previously been the Registrar’s practice to accept a set of minutes that contains details of the resolution.

From 13 March 2023, Companies House will no longer accept a set of minutes which have a resolution embedded within them. A separate copy of the resolution will need to be filed in order to comply with the filing requirements.

Therefore, if you pass any special resolution at a general meeting that are required to be sent to Companies House, you should not send the minutes of the general meeting which includes the resolutions as this will be rejected and returned to you. Instead, you should submit a “print” of the resolutions which is a separate document that will include the basic information about the company, the resolution(s) that were passed, when they were passed and a signature of the secretary or a director of the company certifying that the meeting has taken place and the resolution passed.

FAQs – Financial Conduct Authority (FCA) Applications

Welcome to our regular FAQ section where we spotlight some of the more common topics that you have been asking us to advise on. The FCA have been experiencing some delays in in relation to the authorisation timelines and some of you have been asking us about the appropriate timescales for these applications. The FCA have recently shared their services metrics for the applications, so we’re looking at:

How long will my application with the FCA take?

In October 2022 the FCA published an update to its operating service metrics for authorisations timelines, which confirmed that while the FCA was meeting its deadlines in a number of areas, it was failing to do so in areas including variations to permissions and change in control applications. These are common applications that we see RPs make as part of the merger process (as well as part of their ordinary general business operations).

To deal with the backlog, the FCA have recruited 125 additional permanent colleagues and caseloads have fallen by nearly 60% from 12,500 to 5,500. Allocation of cases to a case officer is also reducing due to an enhanced triage process (which in turn allows the FCA to determine straightforward cases quicker).

The areas where the FCA are continue to not meet target this year are:

• Approved Persons – but according to the FCA this is significantly improved compared to 2021/22.
• Change in Control applications – albeit this is now very close to target, as the FCA has significantly reduced the time to allocate Change in Control notifications to within 3 days of receipt on average.
• New Firm Authorisations
• Payment Services and E-Money authorisations, registrations and notifications – the FCA have confirmed that this is due to incomplete and poor-quality applications.

The FCA notes that the increasing complexity of some cases means that they will not always meet the target. In these cases, additional time is needed for greater scrutiny or engagement. The FCA has also explained that it sees incomplete and poor-quality applications. This remains a particular issue for Money Laundering Registrations, Payments Services Regulations and Electronic Money Regulations applications.

Where the timing of your FCA Application is important, RPs are advised to give themselves the full extent of the FCA’s timeframe for any application. Where possible (noting the above) it is wise to give the FCA additional time – especially where your application involves a degree of complexity. We can advise you about the specific timeframes for any applications that you are proposing to make.

Regulatory grades

Our review of regulatory upgrades/downgrades/regrades in the sector since our January edition has highlighted the following themes:

• Downgrades to non-compliant governance grading and non-compliant viability grading resulting from:
  • lack of regulatory assurance that a robust business planning, risk and control framework was in place;
  • weaknesses in internal controls framework;
  • board not managing affairs with an appropriate degree of skill, diligence, prudence and foresight. The board also failed to demonstrate it understands and is managing risks or has appropriate mitigation strategies in place to ensure the long term viability of the organisation and protect social housing assets;
  • a failure to identify the full accounting implications of the Building Safety Act 2022 resulted in a poor decision surrounding budgeting for the recovery of costs – a reminder to boards to ensure that they fully understand the implications of pending legislation when budget setting;
  • the RSH took the lack of transparency with stakeholders into account in reaching its decision, in particular in relation to the quality of financial data and key risks – a reminder to RPs of the need to keep the RSH and stakeholders informed.
• Breaches of the home standard resulting from:
  • a failure to meet the Decent Homes Standard for 30% of properties
  • a failure to meet statutory health and safety requirements in relation to fire safety as a result of having more than 4,000 overdue high risk fire remedial action in relation to residential blocks
  • a failure to meet statutory health and safety requirements in relation to electrical safety as a result of having more than 4,000 properties without a current electrical condition report

AOB

Forthcoming events – will you be joining us?

Does your organisation have a Senior Independent Director role?

The SID Network offers an opportunity for SIDs to expand their peer group and share ideas and experiences. The next online event will take place on Wednesday 19 April, 9,30am – 11.30am. If your SID would like to participate, please contact sarah.greenhalgh@bevanbrittan.com

Housing Management Update

Join us and our guest presenter Jane Talbot - specialist housing barrister at St Ives Chambers, as we provide a wide-ranging update on the key legal developments for housing practitioners to be aware of in what is a fast-paced area including:

• Renters Reform Bill
• Housing conditions claims – damp and mould
• Service charges in the Supreme Court in 2023 – Aviva v Williams and Sara & Hossein v Blacks
• Public Sector Equality Duty – tips for effective compliance
• The Government’s new ASB Action Plan

Book your place for Tuesday 18 April 2023, 10.15-11.30am

Building Safety Act - are you ready?

The Building Safety Act intends to bring about the ‘biggest improvements to building safety in nearly 40 years’ by putting in place “new and enhanced regulatory regimes for building safety and construction products” and ensuring “residents have a stronger voice in the system”. The costs of both getting it right and getting it wrong can both be extremely high.

Book your place for Wednesday 3 May 2023, 11am - midday

 

Recent housing articles

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