PAPER C

RESOURCES SELECT COMMITTEE – 22 MAY 2003

OUTSIDE BODIES

HEAD OF LEGAL AND DEMOCRATIC SERVICES

REASON FOR SELECT COMMITTEE CONSIDERATION

As part of its 2003-04 Work Plan this Committee decided to review the Council’s involvement in outside bodies.

ACTION REQUIRED BY THE SELECT COMMITTEE

To note current situation and to consider the recommendations of the Standards Committee before making any detail recommendations to the Executive.

BACKGROUND

Attached at Appendix A is a list of all the outside bodies to which the Council appoints along with the number of appointments the Council is entitled to make. As Members will recall it is for the Council or Executive to actually make these appointments, however for all but a small number, these appointments are made on the recommendation of the relevant Select Committee – hence the list is prepared by the Select Committees etc.

There are a total of 162 outside bodies on the list with 317 seats on them.

The list covers a wide range of organisations and some of whom our involvement with has been historical and we have inherited a number following re-organisation in 1995.

We do keep a record of all of these bodies and the Members who have been appointed to them, however the process is not straightforward as for a number of the bodies we rarely get any feedback from the body themselves and certainly in the past we have identified bodies that have ceased to exist for years but to whom we had been appointing Members to represent the Council.

The Standards Committee has also recently been considering from an ethical point of view how best to advise Members who are appointed to outside bodies. Attached at Appendix B is the current advice to Members on their role on outside bodies. It is important t to stress that when a Member is on an outside body it may be (depending on the nature of their appointment) that their first legal duty is towards that body and not the Council and that they are not covered by the Council’s existing insurance provisions. Equally as the Council has little feedback from the various outside bodies we sometimes have difficulty in advising Members on exactly what there responsibilities and liabilities are once they are appointed. Indeed in one (and there may be other similar ones) a Member was appointed to an outside body as a Director – as soon as the formalities of these were complete the Member concerned received a letter from Companies House explaining that the outside body had not complied with the various reporting requirements and that they as a Director were personally liable to a fine of up to £5,000. Consequently the Standards Committee will be considering some guidance for the Council to adopt.

Although at an early stage one of the options that the Standards Committee is considering is recommending a policy that all outside bodies have to provide written evidence of the following: yearly account sheet, indemnity insurance, role of the Member on the outside body and a resume of how the outside body organises itself (number of meetings, where and when they are held etc). Failure to provide this information would enable the Council to question whether a Member should be appointed to the outside body.

The other issue, that the Standards Committee have considered, is that serving on these outside bodies is an important part of the constituency work of all members. Therefore any guidance that is prepared needs to allow such work to continue despite some of the information detailed in the earlier paragraph not being available.

I have been aware for sometime that we need to improve our procedures for dealing with outside bodies and as part of this process in May 2001 I wrote to all outside bodies asking a range of questions on the operation of the body and requesting details of the bodies insurance arrangements. Whilst a number of responses were received unfortunately the response has not been 100%.

RELEVANT PLANS, POLICIES, STRATEGIES AND PERFORMANCE INDICATORS

The only policy directly relating to outside bodies is the appointment process and this is attached at Appendix C.

Depending on the outside body there maybe a variety of links with the Council’s Corporate Plan – for example those outside bodies connected with reducing crime will assist us in helping to “Creating Safe and Crime Free Communities”. More generally the involvement of members in the outside bodies helps the Council to improve its community focus – another of the objectives in the Corporate Plan.

CONSULTATION PROCESS

None

FINANCIAL, LEGAL, CRIME AND DISORDER IMPLICATIONS

No direct financial issues.

There is a Crime and Disorder issue in that several of the outside bodies deal with crime issues and Members or officers attending any outside bodies should continue to actively consider their responsibilities for reducing crime and disorder.

The legal implications are as set out in Appendix B.

APPENDICES ATTACHED

Appendix A – list of outside bodies.

Appendix B – Outside Bodies – Involvement of Members and Officers

Appendix C - Appointments to outside bodies

BACKGROUND PAPERS USED IN THE PREPARATION OF THIS REPORT

As attached as appendices.

Contact Point : Chris Mathews, Democratic Services Manager, F 813280 [email protected]

JOHN LAWSON

Head of Legal and Democratic Services

APPENDIX A

APPOINTMENTS TO OUTSIDE BODIES

THE COUNCIL

Outside Body	Number of Reps
Isle of Wight Community Health Council (CHC)	9

NB Councillor or Rep (must not be a member or employee of any of the various Trusts or Family Health Services Authority) should not be over 70 years of age

ECONOMIC DEVELOPMENT, PLANNING, TOURISM AND LEISURE SERVICES SELECT COMMITTEE

Outside Body	Number of Reps
Afton Marsh Advisory Committee	2
All Weather Smallbrook Pitch	1
Apollo Theatre Trust	2
Areas of Outstanding Natural Beauty Steering Committee	2
Augusta Wilder Almshouses Charity	2
Bembridge and Brading Down Management Committee	3
British Resorts Association	1
British Sports Association for the Disabled	1
British Trust for Conservation Volunteers	1
South East Regional Assembly	1
Conference for Peripheral Maritime Regions	2
Council for the Protection of Rural England (IW Branch)	1
Cowes Deauville Twinning Association	1
Cowes Inshore Lifeboat	1
Cowes Town Regatta Committee	1
Cowes Waterfront Trust	4
Cowes Yachting	1
Dual Management Group for Ryde Sports Centre	1
Gilten Market	3
Golden Hill Fort Management Committee	4
Hants and Wight Trust for Maritime Archaeology	3
Hants and Wight Trust for Maritime Archaeology (Management Committee)	1
Havenstreet Community Association	1
Hudson Charity	2
Island 2000 Trust Ltd	3
Island Games Association Isle of Wight Executive Committee	4
Isle of Wight Archaeological Committee	4
Isle of Wight Area Environment Group	5
Isle of Wight Best Kept Village Competition	2
Isle of Wight Buildings Preservation Trust	7
Isle of Wight Gardens Trust	1
Isle of Wight Playing Fields Association	1
Isle of Wight Rural Community Council - Community Link	3
Isle of Wight Rural Community Council - Representative Board	4
Isle of Wight Rural Development Programme Delegated Fund Committee	3
Isle of Wight Rural Development Programme Strategy Committee	2
Isle of Wight Sports and Recreation Council	4
Joint Management Committee of the Medina Complex	1
Milne Memorial Sports Facilities Co Ltd	2
Mountbatten Centre -Governors Dual Use Sub Committee	1
National Housing and Town Planning Council Southern Region Executive Committee	2
Newtown Nature Reserve Trust Consortium	2
Northwood House Trustee	1
Real World Trust	2
Ryde Carnival Association Liaison Representative	1
Solent Forum	3
South and West Concert Bands	1
South Wight Sports Centre	1
Southern Tourist Board	1
Tourism Partnership	6
Vernon Square Preservation Society	1
Ventnor Bowling Club Management Committee	1
West Wight Swimming Pool Finance Sub Committee	1
West Wight Swimming Pool Trust - Council Management	3
Yaverland Sailing Club	2

EDUCATION, COMMUNITY DEVELOPMENT AND LIFE LONG LEARNING SELECT COMMITTEE

Outside Body	Number of Reps
Arreton (Rookley) Education Foundation	1
Brading Educational Foundation	1
Brading Youth Centre/Club Management Committees	1
Childrens Committee	4
Cowes Youth Centre/Club Management Committees	1
Downside Middle School Youth Club Management Committee	1
East Cowes Yorkie Bar	1
Education Admissions Forum	1
Education Training and Development Advisory Group	1
Godshill Grammar School Endowment Foundation	1
Hants and Isle of Wight Trust Educational Trust for the Blind	1
Island Youth Water Activity Centre	3
Isle of Wight Early Years Development and Childcare Partnership	2
Isle of Wight Healing Arts District Steering Committee	1
Isle of Wight Symphony Orchestra Society	1
Joint Management Committee of the Medina Complex	2
Mountbatten Centre - Governors Dual Use Sub Committee	2
Newport Blue School Charity	2
Newport Youth Centre/Club Management Committees	2
Niton Youth Centre/Club Management Committees	1
Ryde Town Hall Organ Trust	2
Ryde Youth Centre/Club Management Committees	1
Sandown Youth Centre/Club Management Committees	1
Shorwell Youth Centre/Club Management Committees	1
South East Reserve Forces’ and Cadets’ Association	1
South East Museums Service (SEMS)	1
Southern Arts Board	1
St Thomas= Trust	2
Standing Advisory Committee for Religious Education	4
Steve Ross Foundation for the Arts	1
University of Reading Court	1
University of Southampton Court	1
Ventnor Youth Centre/Club Management Committees	1
Wards Education Foundation	3
West Wight Youth Centre/Club Management Committees	1
Wootton Bridge Community Centre Committee	1
Wootton Creek Fairway Association	1
Wootton Youth Centre/Club Management Committees	1
Workers Education Association - Isle of Wight Branch Committee	1
Yarmouth Youth Centre/Club Management Committees	1

ENVIRONMENT AND TRANSPORT SELECT COMMITTEE

Outside Body	Number of Reps
Standing Conference on Problems Associated with the Coastline	1 + Deputy
Standing Conference on Oil Gas Exploration in the English Channel	4
The Local Government Association Coastal Special Interest Group	1

EXECUTIVE

Outside Body	Number of Reps
Association of Hampshire and Isle of Wight Local Authorities	3
County Councils Network	4
Cowes Harbour Commissioners Appointment Panel	1
Hampshire Police Authority Appointment Committee	1
Isle of Wight Partnership for Health and Well-being	6
Isle of Wight Partnership	6 (5 Cllrs + CX)
South Coast Metropole	3
South East Employers	1
South East Regional Forum	2
The Local Government Association	1
The Local Government Association Fire Committee	1
The Local Government Association Rural Commission	1
The London and South East Regional Planning Conference Members Policy Group	1 + Deputy
Yarmouth Harbour Commissioners Appointment Panel	1

FIRE AND PUBLIC SAFETY SELECT COMMITTEE

Outside Body	Number of Reps
Freshwater Inshore Rescue Management Committee	1
Hants and Isle of Wight Local Flood Defence Committee	2
Isle of Wight Citizens Advice Bureau	3
Isle of Wight Post and Telecommunications Advisory Committee	1
Isle of Wight Crime & Disorder Strategy Group	1
Isle of Wight Police and Community Liaison Group	2
Isle of Wight Victim Support Scheme	1
Regional Flood Defence Committee	1
Sandown and Shanklin Inshore Lifeboat	1
Solent Protection Society	1
Solent Sea - Rescue	2
Solent Water Quality Conference	1
Southern Sea Fisheries District Committee	2
Territorial Auxiliary and Voluntary Reserve Association for Eastern Wessex	2

RESOURCES SELECT COMMITTEE

Outside Body	Number of Reps
Isle of Wight Valuation Tribunal	8
J S White Trust	1
Registration Advisory Committee	3
South East Employers	3 (+ 3 deputies)
The Consortium	1

SOCIAL SERVICES, HOUSING AND BENEFITS SELECT COMMITTEE

Outside Body	Number of Reps
Adoption and Fostering Panel	1
Age Concern	2
Central Southern England War Pensions Committee	1
Combined Youth Justice Committee (recommendation from Social Services Committee)	2
East Cowes Community Association	1
East Cowes Housing Association	2
Hampshire Probation Service	1
Hants and Isle of Wight Association for the Deaf	1
Harriet Guy and Cowes War Memorial Convalescent Home	1
Independent Housing Advice Centre Limited	1
Island Women=s Refuge	1
Isle of Wight Partnership for Health and Well-being	3
Isle of Wight Relate	1
Isle of Wight Rural Community Council - Community Link	6
Isle of Wight Rural Community Council - Executive Committee	2
Isle of Wight Rural Community Council - Representative Board	3
Isle of Wight Society for the Blind	1
Islecare (97) Ltd	1
Leeds Charity	1
Medina Housing Association Management Board	2
National Housing and Town Planning Council Southern Region Executive Committee	1
National Service Framework for Older People	1
Newport and District Community Association	2
Newport Charities Trust	1
Riverside Centre Board of Directors	2
Ryde Relief Society	1
South Wight Housing Association Management Committee	2
The Combined Council for Youth Services	1
Tom Woolgar	5
Vectis Housing Society Ltd	2

APPENDIX B

OUTSIDE BODIES - INVOLVEMENT OF MEMBERS AND OFFICERS

Both Councillors and officers of the Council are involved in outside bodies. This note draws attention to the legal position.

1. Form of outside body

Outside bodies can take many forms. They may be an unincorporated association, a company limited by guarantee or by shares, or a trust. Any of these may be a registered charity or be charitable even though not registered. The table below should help to identify these.

	Association	Limited Company	Trust
membership	may be numerous, usually individuals	from two to large number of members. The Council may be a corporate member	none
Who is responsible for day-to-day management?	management or executive committee or similar body	directors	trustees
legal responsibility	members of management committee	corporate	trustees
can the body have charitable status?	yes	yes	yes
governing document	constitution	memorandum and articles of association	trust deed
can the Council as a corporate body be involved?	only if the constitution allows corporate members	yes as a member, not as a director	yes as a trustee

In addition to the above there may be statutory committees which do not have an independent legal status but are part of the sponsoring organisation.

2. Involvement of Councillors and Officers

The Council diary lists a large number of outside bodies on which the Council is represented. Normally this is by a Councillor who is appointed to the management committee or directors or board of trustees of the organisation.

In addition the Council provides professional and administrative services to a number of bodies, and officers may therefore be doing work for them.

3. Understand the role

Although members may be appointed by the Council to represent its interests, in law they have the same role and responsibility as the other members of the management committee, or board of directors or trustees. They do not have the power to commit the Council to any action or liability without the Council’s specific and separate agreement. Their first responsibility in law is to the outside body, to safeguard its interests. They have what is known as a fiduciary duty to act in the best interests of the body. This is the case irrespective of whether the individuals were elected by members of the body itself, or nominated by the Council. The duty varies according to the type of organisation, as follows.

Members of the management committee of an association are personally responsible for the running and funds of the organisation. If the organisation faces legal action they jointly have to defend that and jointly are responsible for the costs if the association does not have the necessary funds itself. If the association becomes bankrupt they will jointly be responsible for any shortfall in its liabilities.

Directors of a company do not generally have personal responsibility. Any legal costs or damages are payable out of company funds. If the company goes out of business they do not have to meet its liabilities. However, there are a number of areas where they may have personal liability. These include trading whilst the company was insolvent and fraudulent trading. Directors can also commit offences such as failing to file documents at Companies House within statutory time limits.

Trustees are personally responsible for any shortfall in trust funds or property, and would have to make these up out of their own pocket.

4. Corporate Killing

The Government is considering amendments to the criminal law. The key proposal is that there will be a new offence of corporate killing which will be committed only where the conduct of the company or other corporate body in causing death falls far below what could reasonably be expected. A death should be regarded as having been caused by the conduct of a corporation if it is caused by a failure in the way in which the corporation's activities are managed or organised to ensure the health and safety of persons employed in or affected by those activities. It would be possible for a management failure on the part of the corporation to be a cause of a person's death even if the immediate cause is the act or omission of an individual. The maximum penalty for corporate killing would be an unlimited fine and a remedial order to correct the original cause of any accident. These proposals would relieve directors of some personal responsibility although consideration is still being given to an offence which can be committed by individual directors if they can be shown to have been responsible for the failure.

5. Advice

The Policy Strategy Committee at its meeting on 11 June 1997 issued the following advice to Councillors. This advice still holds good.

Before accepting a directorship of an external company (or trust) you should consider how onerous your responsibilities are likely to be and should only accept the office if you are satisfied that you have the time and the capacity to undertake them.

1. You should also consider whether there is, or likely to be, any significant conflict of interest between your role as director and your role as Councillor - if such a conflict of interest exists or is likely to arise you should seriously consider whether it is prudent to take on the office.

2. You should assess the risk of things going wrong which might raise the spectre of personal liability. Matters to be taken into account are the nature of the functions of the company/trust and the amount of money it handles/deals with. Some external companies are handling considerable sums of money during the course of each year. Before taking on such a directorship you need to be comfortable with the role - if you are not you should refuse to accept it.

3. You should, before you accept such an appointment, establish whether the body has appropriate insurance covering you. If not you should find out whether such insurance can be taken out. If there is no insurance protection consider seriously whether you wish to proceed without it.

4. Having taken on the role you must take your responsibilities very seriously and, on a continuing basis, you should look very closely at what your organisation is doing. You should read all the papers carefully; attend meetings whenever possible (absence from meetings will not necessarily protect you if things go wrong); probe the officers if you do not believe you have been given sufficient information or if you have concerns; ensure that you understand your responsibilities and the responsibilities of the officers, including the extent of officer and Chairman delegated powers; when necessary ensure that the organisation takes external professional advice; generally keep tabs on the affairs of the organisation. If you have concerns you should raise them and, if need be, you should stand up and be counted (keeping you head down will not protect you).

5. The following points deal with the nature of the responsibilities of a company director:

(a) The directors owe to the company fiduciary duties of loyalty and good faith. They must always act in what they believe to be the best interests of the company. They must not fetter their discretion as to how they should vote or act as directors. They should not exercise their powers as directors for any purposes other than those which the powers were given. They must avoid placing themselves in a conflict of interest between their duties as directors and their personal interests or obligations to others (the Council). When carrying out their duties, they must apply reasonable standards of care and skill. In the exercise of these duties, it is possible that circumstances could arise which require the interests of the company to be put above the Council representatives’ instructions from the Council.

(b) As directors of the company, the Council’s representatives will be subject to rules of confidentiality. It would be improper for the Council’s representatives to disclose the company’s confidential information without the consent of the company.

(c) Directors of a company have a continuous responsibility to consider the financial affairs of the company and to ensure solvent trading. If a company director fails in his duty and does not seek to avoid potential losses by creditors, that director may be liable to a claim by creditors or a liquidator to contribute towards the debts of the company.

6. Charitable bodies

Any of the above forms of outside body may be charitable. If that is so then the members of the managing body are in law regarded as the charity trustees. They together have full responsibility for the affairs of the charity and can be personally liable if it makes a loss. A summary leaflet from the Charity Commission is attached which sets out the main duties and responsibilities of the role.

7. Insurance

All the above bodies can insure to some extent against the liabilities of members of their governing body. However, that insurance cannot cover acts which are wilfully or carelessly unlawful.

8. Indemnity

The Council does have power in certain circumstances to give an indemnity to members and officers, so that while they are carrying out lawful business of the Council or acting on its behalf the Council could agree to meet any liabilities they might incur. In respect of officers this can be done either specifically or by incorporation in the contract of employment under s.112 Local Government Act 1972.

In respect of members a similar indemnity can be given provided they are carrying out business on behalf of the Council. Activities undertaken as a representative of the Council would be covered.

However, there are limits to an indemnity by the Council in that it cannot cover matters which are outside the powers and duties of the Council. This rule was established in the case of Burgoine and Cooke v. London Borough of Waltham Forest (1996). Since a company director, trustee or member of a management committee has duties to the organisation which are duties beyond the powers of the Council, it will always be the case that an indemnity cannot cover all eventualities. That is why it is important to check the insurance position, and to carry out the fiduciary duty to the outside body carefully and thoroughly. In addition it may be thought that an indemnity would only apply where the Council has appointed the Councillor concerned to the outside body.

The Government has recently introduced an amendment to the Local Government Bill which will give the Secretary of State the power to make regulations conferring on local authorities the power to give an indemnity to Members against civil liability. Note that this will not cover criminal liability.

An indemnity can however cover professional and administrative services provided by officers to an outside body in circumstances where the Council has power to provide those services. Often the provision of such services is done for a fee which provides an income for the Council.

There is a statutory indemnity under s.265 Public Health Act 1875 which covers both officers and Councillors but only in respect of that Act.

APPENDIX C

APPOINTMENTS TO OUTSIDE BODIES

The policy in relation to the appointments of Council representatives to outside bodies is as follows:

1. Appointment to the following outside bodies be made by the Executive:

Association of Hampshire and IW Local Authorities

County Council Network

Cowes and Yarmouth Harbour Commissioners Appointments Panel

Hampshire Police Authority Appointments Panel

IW Partnership for Health and Wellbeing (3 by the Executive and 3 by the relevant Select Committee)

IW Partnership

South East Employers (1 by the Executive and 3 by the relevant Select Committee)

South East Regional Forum

The Local Government Association

The Local Government Association Fire Committee

London and South East Regional Planning Conference

2. All other appointments to outside bodies will be filled by the Executive who will consider the recommendations of the relevant Select Committee as set out in the Appendix [attached as Appendix A].

3. All Council appointments will be for the life of the Council unless a time or other restriction is placed on these by the relevant outside body.

4. All Members will be notified of any vacancy.

5. If the number of nominations received equals the number of vacancies, then in consultation with the relevant Portfolio Holder and Select Committee Chairman, the Proper Officer, shall appoint the nominations to those vacancies.

6. If the number of nominations received exceed the number of vacancies, each of the nominees will be asked to submit a short explanation as to why they should be appointed to the vacancy. These submissions will then be passed to the relevant Select Committee or Executive in accordance with (1) or (2) above.

7. When more than four Members are required to sit on an outside body, then these are filled on a politically proportionate basis.