Company Secretary Snapshot - April 2024

Welcome to April’s snapshot. This month we’re looking at the latest updates resulting from the Social Housing (Regulation) Act, the latest changes coming in under the Economic Crime and Corporate Transparency Act 2023, our takeaways from the Housing Diversity Network Conference and more. Enjoy!

Social Housing (Regulation) Act 2023 (SHRA)

1. New Consumer Regulation Regime Begins

On 1 April 2024, the serious detriment test was removed and four ‘new’ consumer standards came into force, bringing consumer regulation in line with the Regulator of Social Housing (RSH)’s approach to the economic standards. The RSH has recently updated much of its guidance to make provision for the changes that have come in as part of the new regime.

The RSH has confirmed that it has notified those registered providers of social housing (RPs) that will be included in the first wave. The RSH will then publish regulatory judgements including the new consumer grading for RPs following these inspections  - we are expecting the first of these over the course of the summer. 

Any RPs that are not included in the first wave of inspections are still required to deliver the outcomes in the new standards. On 3 April 2024, Fiona McGregor, chief executive of the RSH wrote to RPs to remind them that; “even the best landlords will have room for improvement…If you identify material failings in your performance, we expect you to let us know by contacting your regulatory contact or enquiries@rsh.gov.uk, and to start putting things right.” You have no doubt conducted your gap analysis (or are well underway with this) and will be planning how you report into the RSH in relation to any areas of non-compliance. Please do get in touch with the team if you are considering how best to approach this or whether the issues identified are ‘material’. 

2. RSH Notifications

Since 2017, the RSH has required RPs to notify it of certain  constitutional changes and/or restructures. The RSH has updated its notification process and introduced new prescribed forms for RPs to use where they are under-going these changes. Key changes to the notification process include:

• Changes in name, address or Charity Commission number are now notifiable changes
• Certain changes to directors, committee members, trustees or LLP members must now be notified to the RSH. The circumstances affected are where there has been an increase, decrease or other change of more than 50% to board/committee membership in a 12 month period 
• Receiving a transfer of engagements or an undertaking from a body that is not an RP is now a separately notifiable event
• Constitutionals changes now explicitly include notifiable changes to trusts, as well as articles of association and rules
• Restructures and constitutional changes involving charitable incorporated organisations (CIOs) are now included
• Secondary notifications (formerly re-registrations of a restructured body) are now only required where the “successor body” is a body created by:
  • an amalgamation of registered societies, a registered society with a company or of CIOs
  • a transfer of engagements whereby the receiving company or society is not an RP 
  • a transfer to a CIO whereby the receiving CIO is not an RP

In addition, if you are making any notifications then make sure you use the latest forms available on the RSH’s website rather than forms you may previously have stored.

3. Housing Ombudsman launches consultation on proposed approach to Good Practice

SHRA gave the Housing Ombudsman (HO) the power to issue guidance to its members on good practice in relation to carrying on their housing activities and, as a result, the HO has launched a consultation for RPs on its proposed approach for issuing Good Practice guidance and potential topics. 

The consultation seeks feedback on the HO’s principles of good practice and proposed approach to delivering good practice. The HO is also seeking feedback on potential topics for its first Good Practice guidance, which includes:

• making an effective apology
• deciding on appropriate levels of compensation
• effective complaint handling during merger or stock transfer
• effective root cause analysis of complaints
• knowledge and information management

The HO’s proposed approach is to encourage RPs to self-assess at the point that Good Practice is issued rather than waiting for a complaint about the topic area and an order from the HO to do so. The HO has pointed out that good practice is not best practice and there may be entirely justifiable reasons that an RP feels unable to implement it – one of the purposes of the self-assessment is to record those reasons.

The consultation will run until 21 May 2024.

Economic Crime and Corporate Transparency Act 2023 (ECCTA) – Updates to Companies House Powers

The ECCTA introduces a number of changes to company law, aimed at preventing abuse of UK corporate structures and tackling economic crime. We have been following the key provisions that have been introduced over the past few months. The latest provisions to come into force relate to Companies House’s ability to impose financial penalties.

On 26 March 2024, the Economic Crime and Corporate Transparency Act 2023 (Financial Penalty) Regulations 2024 were published. These regulations allow Companies House to impose a financial penalty on a person if satisfied beyond reasonable doubt that the person has committed misconduct amounting to “a relevant offence”. A relevant offence is widely defined as any offence under the Companies Act 2006 other than an offence under Part 12 (company secretaries), Part 13 (resolutions and wording) or Part 26 (audit). This could include fines for failing to keep statutory registers or other filings up to date. We will be watching closely to see how Companies House uses this power.

As part of the ECCTA reforms, Companies House can impose financial penalties directly (as an alternative to criminal prosecution), where it is satisfied that an offence has been committed beyond a reasonable doubt.

Debrief from the Housing Diversity Network Board Diversity Conference 2024

On 19 April 2024 we were delighted to join Housing Diversity Network’s (HDN) Board Diversity Conference in Leeds. 

Our key takeaways from the interesting and thought-provoking day are set out below:

• 'don’t duck the issue’ – tackling equality, diversity and inclusion (ED&I) improvements within organisations shouldn’t be at the bottom of the agenda;
• there is a chronic underrepresentation of minoritised groups on housing boards. The National Housing Federation’s Code of Governance 2020 requires that “the membership of board and committees comprises people with diverse backgrounds and attributes, having regard to the diversity of the communities the organisation serves…” There’s still a long way to go for many organisations in this regard;
• utilise alternative recruitment methods to attract a broader range of applications e.g. using video applications in place of written, if preferred;
• a good board understands that ED&I is a key component of board decisions. Creating a culture of openness and honesty will create a safe space for constructive challenge on this issue from the board and others; 
• working towards a more inclusive and representative housing sector is everyone’s responsibility, especially if you have the power to make change happen. Allyship is vital and leaders set the tone and culture of organisations;
• How connected are you to the communities you are serving? - Zara Mohammed (Secretary-General, Muslim Council of Britain) challenged attendees to really get to know their communities. How are you getting under the skin of what barriers your community is encountering when accessing housing and services?

To find out more about HDN, click here. 

FAQs: Use of facial recognition technology to monitor staff attendance deemed to be unlawful

Welcome to our regular FAQ section where we spotlight recent changes or common topics that you have been asking us to advise on. This month were looking at a recent development in data protection related to employees, as we know many of you will have this within your remit. 

The Information Commissioner’s Office (ICO) has recently ordered Serco Leisure and seven associated community leisure trusts (who were acting as joint controllers with Serco Leisure) to stop using facial recognition technology and fingerprint scanning to monitor attendance of its leisure centre employees.

Serco Leisure had introduced the technologies to process 2000 employees’ biometric data at 38 leisure facilities; the purpose being to monitor staff attendance. Employees were not offered a clear alternative to the processing and the ICO determined that the imbalance of power between Serco Leisure and its employees meant it was unlikely employees would not feel able to oppose the processing of their data.

Serco Leisure failed to show why the processing was necessary or proportionate when alternative, less intrusive, methods of employee monitoring were available. In its media briefing, the ICO highlights that a security breach of biometric data has a much higher risk of substantial harm due to its wholly unique nature to an individual.

The key takeaway here is that RPs should ensure they fully consider the risks before introducing biometric technology to monitor staff, for example where they are used to monitor staff attendance at offices post-pandemic or in the performance of services. Read the ICO’s guidance on the use of biometric data here.

Regulatory grades

Our review of regulatory upgrades/downgrades in the sector has highlighted the following themes:

• Governance upgrades resulting from:
  • Strengthening risk and internal control framework, including rent setting to ensure effective management of the process. 
  • Continuous improvement in governance processes and wider risk management approach. 
    Performance and reporting framework supporting effective board oversight of risks and delivery.
  • Post-merger actions including:
    • strengthening governance and compliance frameworks to support the enlarged group 
    • agreed strategy to simplify the organisation’s activities and structure
      improving the management of risks across the group, including those relating to financial and treasury information
    • actioned pre-merger due diligence findings 
    • implementing a series of changes to improve the quality of data
    • strengthening reporting and oversight of strategic risks
• The RSH continues to find that the current economic uncertainty in relation to inflation and interest rates alongside investment requirements in existing stock means that many RPs now have less financial headroom and reduced capacity to respond to adverse events. The RSH has noted the following additional reasons for Supporting a change to the basis of viability gradings:
  • Reliance on sales and a need to deliver against challenging assumptions to maintain interest cover covenant compliance.
  • Increase in spend on fire safety work
  • Diversified business streams 
  • A reliance on revenues from the sale of both current and fixed assets to generate future liquidity Ability to raise additional facilities restricted by holding a limited number of properties that can be used as security
  • Increased costs relating to delivery of its repairs and maintenance programmes.
    Operating with low margins under business model. A significant part of income coming from support contracts and therefore subject to uncertainty and constraints. 

Many of the above themes are things we are seeing in our work in the sector. For example:

• Regular review of group structures is important to ensure that they continue to reflect your strategy and protect the RP from risk as far as possible. Mergers are often a trigger to review duplicate and historic entities, but whether you are recently merged or not it is a worthwhile exercise to streamline and remove complexity. We regularly conduct ‘fit for purpose’ structure reviews and can help organisations formulate their plans to show direction of travel, ready for any inspection. Our fit for purpose structures series of webinars can be found on our website.
• We are increasingly seeing organisations looking to void disposals programmes to raise receipts and also deal with ‘problematic’ properties (due to noise nuisance; energy performance; complaint numbers etc). It is important that organisations have a clear strategy and consider charitable / regulatory considerations within this, and efficiency benefits can be realised in terms of costs if organisations engage with advisers early and set out a clear plan / process to progress such disposals.
• Raising funds can be severely delayed by a failure to prepare properties for charging exercises – timely planning and preparation is key here!

AOB

NHF Governance Conference

Will you be attending the NHF Governance Conference this year?  This popular annual event will be taking place in London on 19 June.

This year we will be hosting a breakout session on Resourcing the governance team and battling merger fatigue (at 12.15-13.00). Join Rose Klemperer – Partner, Bevan Brittan and Sarah Cameron – General Counsel and Company Secretary, Peabody, as they discuss:

• Innovative solutions to a lack of resource in your governance team
• The increasing role of governance in coordinating changing strategic expectations
• Sector changes following merger activity and compliance requirements across large and diverse group structures.

We look forward to seeing you!

Legal Update Service

As you will be aware, all RPs are required to meet the Governance and Financial Viability Standard requirement to comply with ‘all relevant law’, and make certifications in their annual accounts in respect of this.
 
With so much change in the sector at the moment, it can be difficult to monitor, interpret and implement requirements. We offer a variety of services to enable you to demonstrate compliance, including a subscription-based legal update service covering key legal, regulatory and policy changes within the social housing sector.
 
Our approach has been created in partnership with the sector, for the sector, and moves away from a ‘tick box’ approach to a meaningful tool, enabling you to:

• integrate the product into your control and risk management frameworks
• easily and quickly identify priority actions and access tools to assist with this
• empower and inform your teams to take responsibility for effecting such actions
• confidently report back to your Board on key risks areas and how these are being addressed.

To find how you can subscribe and watch our video introduction to our legal update service, please contact Diarmaid O’Sullivan.