Following the recommendations of the Elton Report, the Housing Corporation has now revisited Schedule 1 of the Housing Act 1996 and updated its good practice note entitled “Maintaining Standards of Probity”.
Although strictly speaking the guidance applies specifically to industrial and provident societies and to non-charitable companies, charities, co-operatives and those within group structures are expected to follow its spirit. The new note replaces all previous versions.The existing exemptions 1 – 9 remain. The note also introduces the following four new exemptions, which are designed to reduce the burden of regulation on associations that are performing well, and provide guidance and assistance for governing bodies when making decisions:
EXEMPTION 10: SETTLEMENT OF EMPLOYMENT RELATED DISPUTES
This exemption allows an association to make a payment that would otherwise be a breach of Schedule 1 in full and final settlement of an employment related dispute. An association can make such a payment provided that it has sought and secured advice, it is not under supervision, the payment does not exceed £30,000 and the payment is not being made to the Chief Executive or to a Director of the association.
This exemption should be used sparingly. It cannot be used to “pay off” senior officers, but with sound written legal advice modest nuisance claims can be settled.
EXEMPTION 11: PAYMENTS TO BUSINESSES TRADING FOR PROFIT
This allows an employee board member or close relative connected to an association to sit on the board of a company trading for profit and which trades with the association. To rely upon this exemption the association must have a significant interest in the business concerned.
This would be useful to associations entering into joint ventures that wish to have a board member or senior officer on the board of the new joint venture company. The exemption allows this, but contains the proviso that should the board member or senior employee receive a payment for their services to the joint venture company, then that payment ought to be made to the association.
EXEMPTION 12: PROVISION OF INDEMNITIES
This allows an association in limited circumstances to indemnify its officers or board members for expenses they incur defending civil or criminal proceedings. Any such indemnity should however be treated either as a “loan”, which becomes repayable by the employee or board member in the event of their being found at fault, or as something to be recovered (at least in part) from the party unsuccessfully pursuing the board member or employee.
EXEMPTION 13: PERMITTED PAYMENTS AND BENEFITS
This exemption allows the association to make a payment that does not exceed £300 per person per year. In addition, invitations to corporate events and hospitality can also be accepted in appropriate circumstances subject to a limit of £50 per person per individual event and an overall limit of £250 per person per year.
Schedule 1 continues to be fundamental to good governance. Whilst each case must be treated on its merits, examples of good practice include:
- Placing every Schedule 1 matter before the board and minuting it appropriately;
- Any board members or employees affected ought not to attend the board meeting and both their departure and (in due course) return to the meeting should be minuted.
- A note of any decision should be made on the individual’s personnel file;
- The Schedule 1 Register should be kept up to date and reviewed in accordance with an association’s policy
- If in doubt, seek legal advice and secure it in writing.