New NHF Code of Governance published
The new Code is finally here! It is worth taking this opportunity to reassess the most appropriate Code for your organisation with your board. Assuming you do decide to adopt the new Code, an in-depth gap analysis will be required, as the new Code is a step-change from the previous version. You may also need to factor in Rule changes to your board plan, particularly if you are proposing to adopt the Code this financial year.
Sarah Greenhalgh was part of the Advisory Board for the new Code, so keep an eye out for our Governance Spotlight Specials on the key themes and her upcoming blog post for the NHF.
Implementation of Rule changes – regulatory downgrade
The recent regulatory judgement for Incommunities Group Limited highlighted the importance of ensuring rule changes are appropriately implemented into your governance structures.
IGL self-reported in 2018 for two of its subsidiaries because rule changes had not been implemented correctly. This error was discovered when IGL was carrying out further governance changes in May 2020. As a result the two subsidiaries made incorrect certifications about their rules to lenders.
Amending your rules usually involves a significant amount of resource and planning. However, once the rules have been approved it is important to take stock and make sure all procedural steps have been take to correctly implement the changes. For example, although boards will tend to rely heavily on the Company Secretary to advise them on the content of the rules, it is important that they also understand the key provisions – this is important to ensure proper performance of their fiduciary duties. The governance team will also need to understand the key provisions too, to ensure they are aware of key issues when supporting the business of the boards. Finally, take time to reflect on the practical impact of rule changes – they will more than likely require changes to your Standing Orders / Governance Framework, but also wider policies such as shareholding, conflict of interest and the code of conduct.
FCA Mutuals Societies Team extends flexibility as a result of the ongoing impact of Covid-19
Most relevant are the following:
- Annual returns and accounts - if your submission is due by 20 April 2021, the FAC will wait 3 months before they take any action to follow up on delayed submissions.
- Submission of applications - measures have been put in place to make it easier to submit applications electronically throughout the pandemic, including suspending the requirement to make statutory declarations.
- General meetings – many organisations have needed to postpone AGMs as a result of the pandemic. The FCA has advised that it is for societies to reach their own decision on the implications of breaching their own rules or legislative requirements. The FCA has provided a useful update on their website https://www.fca.org.uk/firms/our-responsibilities-mutual-societies .
Modern Slavery Statements –Transparency in supply chains consultation - Government Responses
Company Secretaries will be familiar with the current Modern Slavery Statement (MSS) requirements that apply to all corporations with an annual turnover of £36m or more.
The ‘Transparency in supply chains consultation’ was published on 9 July 2019 and a report was published on 22 September 2020 summarising the responses from various organisation’s and their views on the consultation proposals and the next steps of the Government.
The report sought views on proposed changes to the MSS, some of which included:
- Mandatory content - most respondents supported the introduction of mandatory reporting, although some highlighted the risk of encouraging a ‘tick-box’ approach as some companies might find it difficult to report on some areas;
- Single reporting deadline - the majority of respondents agreed that a single reporting deadline would clarify the reporting process; and
- Central reporting platform - in addition to uploading MSS on the organisation's website. Although the majority of respondents did not think there would be any challenges to publishing statements on a government registry, there were some who worried about the resources.
Legislation should be forthcoming in early 2021.
AGM now extends to March 2021
The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Suspension of Liability for Wrongful Trading and Extension of the Relevant Period) Regulations 2020 (the Regulations) came into force on 25 November 2020. Key provisions are:
- The ability to hold virtual AGMs and restrict the attendance of members has now been extended to 30 March 2021.
- The suspension of wrongful trading liability for directors, which was originally in place from 1 March 2020 to 30 September 2020 has now been renewed and now applies between 26 November 2020 and 30 April 2021.
Financial Reporting Council: Review of Corporate Governance Reporting
For those associations who have adopted the UK Corporate Governance Code, the FRC has published a review of the quality of reporting on the Code. This found that some organisations are continuing to treat the code as a ‘box ticking’ exercise instead of using it as an opportunity to communicate high-quality information about the way in which their governance functions to deliver the organisation’s purpose and strategy.
The FRC has set out expectations for improvements, including:
- Provide clear and meaningful explanations of how you achieve good governance standards in line with the flexibility offered by the Code.
- Clearly show the impact of engagement with stakeholders on decision-making, strategy and long-term success.
- Better assessment and monitoring of culture, including consideration of methods and metrics used.
- Demonstrating commitment to diversity and inclusion through actions, such as improved succession planning and recruitment from diverse talent pools.
November was a busy month in the sector. In addition to the new NHF Code, we finally saw the publication of the social housing white paper: The charter for social housing residents.
Other key reading this month:
- Regulator of Social Housing’s Sector Risk Profile 2020
- The Sustainability Reporting Standard for Social Housing
In January look out for our Senior Independent Directors networking event with Savills – let us know if your SID would like to attend.