ncht group company and board restructure agm 23 sept 2008 [tmbc executive decision document 230908)

8/6/2019 NCHT Group Company and Board Restructure AGM 23 Sept 2008 [TMBC Executive Decision Document 230908)

1/31

EXECUTIVE DECISION NOTICE SERVICE AREA: Economy and EnvironmentSUBJECT MATTER: NEW CHARTER HOUSING GROUP RESTRUCTURE ANDCOUNCIL NOMINATIONS TO NEW CHARTER HOUSING

TRUST AND NEW CHARTER HOMES.DECISION: 1. That a letter of support be sent to the HousingCorporation regarding the proposed restructure of NewCharter Housing Group which includes the proposal tomerge New Charter South and New Charter North intoNew Charter Homes Limited.

2. That New Charter be requested to increase the numberof Tenant Directors on the new Board of New CharterHousing Trust, from 1 to 2, at their Annual Generalmeeting.

3. Councillor Gerald P. Cooney and Maria Bailey to be theare nominated Local Authority representatives on NewCharter Housing Trust, at its Annual General Meeting on23 September 2008.4. Councillor Martin Wareing, Councillor Margaret Downsand Councillor Jim Middleton are nominated as LocalAuthority representatives to the Board of New CharterHomes Limited, at the Groups Annual General Meetingon 23 September 2008.5. That the Assistant Executive Director of Housing andCommunity Regeneration be appointed as the Council'snominee to represent it as a member at the New CharterBoards at their Annual General Meeting on 23September 2008.

DECISION TAKER(S): Councillor John TaylorDESIGNATION OFDECISION TAKER (S): Cabinet Deputy for Personal Services

DATE OF DECISION: 23 September 2008REASON FOR DECISION: New Charter Housing Trust has completed a strategic review ofits organisation following guidance published by the HousingCorporation and the need to support its growth in a period ofstrategic change in the Registered Social Landlord sector.

The current difficulties in the housing sector and the widerfinancial situation will increase some housing organisations'motivation for merger. In addition, an increasing number ofHousing Associations are facing tight Business Plans andreduced capacity and with a general climate of ongoingrationalisation in the sector NCHT will have more opportunity toconsider options for growth and development.One of the main changes proposed in the review is to move

T:\Authorisations\Executive Decisions\New Charter Housing Group Restructure and Council Nominations to NCHT and New CharterHomes Sept 08\NCHT and New Charter Homes Report FINALdoc 1


2/31

CONFLICT OF INTEREST:DISPENSATION GRANTEDBY STANDARDSCOMMITTEE ATTACHED:REFERENCEDOCUMENTS:

direction of the business of the biggest social landlord in theborough and enabling the company to be a viable business inthe interests of the residents of Tameside. Unfortunately, toachieve this growth there appears to be a need for an increasein properties from outside Tameside and this causes a dilutionin the number of Tameside directors and that influence throughthe actual board.None.Not Applicable.

The background papers relating to this report can be inspectedby contacting the Report Writer, Huw Davies, AssistantExecutive Director Housing and Community Regeneration by:'BTelephone: 01613423696411 E-mail: [email protected]

, 2 ~ . 01' rJ{tf} 'VSigned ...?L . ................................ Dated ...................................C Taylor, Cabinet Deputy for Personal Services

T:\Authorisations\Executive Decisions\New C harter Housing Group Restructure and Council Nominations to NCHT and New CharterHomes Sept 08\NCHT and New Charter Homes Report FINAl.doc 3


3/31

Economy & EnvironmentHuwDaviesAssistant Executive DirectorHousing and Community RegenerationCouncil Offices, Wellington RoadAshton-under-lyne, Tameside Ol6 6DlIan Munro www,tameside.gov.ukChief ExecutiveNew Charter Housing Trust Ask for Huw DaviesCavendish Street Direct Line 0161 3423698Ashton-under-Lyne Fax 0161 3422842Lancashire email: [email protected] Your RefOur ReI HD/RACDoc ReI HD/Letters/2008/1MunroDate 24 " September 2008

Dear IanRE: New Charter Group Structure Changes to the Membership and Board Composition

Thank you for the information regarding the changes to your company.We understand the strategic drivers for change in your sector and the need for you to respond tothese. The Council supports your Group Structure, Membership and Board composition changesincluding the change agreed at your AGM to increase the directorship of the new, New CharterTrust Board, to 11, through the increase in Tenant representation to 2. This sees the new TrustBoard with 11 Directors made up of 6 independents, 2 Tenants, 2 Council and 1 Executive.We also support another key change, the establishment of New Charter Homes to replace NewCharter North and South, with a new Board of 10 Directors, including 3 independents (with 1nominated from New Charter Housing Trust), 3 Tenants, 3 Council representatives and 1Executive.We hope, like you, these changes will strengthen and grow your organisation and will have apositive impact on your tenants and employees in Tameside.Should you require any further information please do not hesitate to contact me.Yours sincerely

HuwDaviesAssistant Executive DirectorHousing and Community Regeneration


4/31


5/31

DECISION: review of its organisation following guidance published bythe Housing Corporation and the need to support its growthin a period of strategic change in the Registered SocialLandlord sector.The current difficulties in the housing sector and the widerfinancial situation will increase some housing organisations'motivation for merger. In addition, an increasing number ofHousing Associations are facing tight Business Plans andreduced capacity and with a general climate of ongoingrationalisation in the sector NCHT will have moreopportunity to consider options for growth and development.One of the main changes proposed in the review is to movefrom two companies with operational responsibility for thetransferred housing stock New Charter North and NewCharter South to one new company New Charter HomesLimited.At the time of stock transfer in March 2000, New Charterwas Britain's largest stock transfer organisation. Because ofthe size of the organisation, the Government insisted thehousing stock was split between two companies. TheCouncil argued against this at the time, but the HousingCorporation would not accept its arguments and followingfurther consultation with tenants produced a geographicaldivision of homes, New Charter Housing (North) Limited andNew Charter Housing (South) Limited.The reality is the split showed differences for a short periodafter transfer, after which the two stock owning companiesproduced parallel policies and procedures. The division hasseen the duplication of administration, accounts records andadditional costs. Since 2001, the efforts to improvecustomer satisfaction have been collective and these havebeen so discernable variations in the rise of tenantsatisfaction.The review has concluded that the New Charter HousingTrust (parent) should be responsible for the overall strategicdirection, control, performance and vision of the group,particularly growth and development, with its subsidiariesfocussing on operational responsibility and the improvementand delivery of their services.Following extensive consultation with Board Members,tenants and lease holders, funders and the HousingCorporation, there is now widespread support for thebenefits of the group structure and the establishment of NewCharter Homes Ltd. The Housing Corporation are nowprepared to approve a merger having published significantpolicy guidance on group structures, economy andeffectiveness, stock rationalisation and have requested aletter of support from the Council.

ALTERNATIVE OPTIONSREJECTED (if any): Not Applicable.

C:\Oocuments and Settings\dorothy.moore\Local Settings\Temporary Internet Fifes\OLK6C\NCHT and New C harter Homes ReportFINAL.doc 5


6/31

CONSULTEES:

FINANCIAL IMPLICATIONS:(Authorised by BoroughTreasurer)

LEGAL IMPLICATIONS:(Authorised by BoroughSolicitor)

RISK MANAGEMENT:

LINKS TO COMMUNITYPLAN:

REFERENCE DOCUMENTS:

Executive Leader, and Executive Director Economy andEnvironment.The report has no direct financial implications for theCouncil. New Charter's ability to generate savings arisingfrom the changes should enable the Group to operate moreefficiently and give tenants better value for money andsupport the groups aspirations for growth.I note in the report that "we received confirmation thatTMBC were satisfied with the restructure proposals on 19thMay 200f1'. It is important that NCHT understand theCouncil's statutory Governance arrangements to keep bothorganisations safe and to achieve this appropriate andformal early consultation takes place. There is a difficultbalancing act to be achieved, between the Councilachieving significant influence over the strategic direction ofthe business of the biggest social landlord in the boroughand enabling the company to be a viable business in theinterests of the residents of Tameside. Unfortunately, toachieve this growth there appears to be a need for anincrease in properties from outside Tameside and thiscauses a dilution in the nurnber of Tameside directors andthat influence through the actual board.If New Charter Housing Trust does not take appropriateopportunities to diversify and position itself for growth in thecurrent housing environment, the organisation may be opento approaches from other organisations seeking mergersand this may lead to less influence and focus on socialhousing stock in Tameside.New Charter Housing Trust is a significant contributor to theBorough's economy and appropriate opportunities tosupport its growth and viability should be taken.Investment in social housing is critical to key elements of theBorough Community Strategy, including: SupportiveCommunities and a Prosperous Society.The background papers relating to this report can beinspected by contacting the Report Writer, Huw Davies,Assistant Executive Director - Housing and CommunityRegeneration by:BTelephone: 0161 3423696 E-mail: [email protected]

Signed: ................................................... Dated: ...................................... Huw Davies, Assistant Executive Director fo r Housing and Community Regeneration

C:\Oocuments and Settings\dorothy.moore\Local SeUings\Temporary Internet Files\OLK6C\NCHT and New Charter Homes ReportFINAL.doc 6


7/31

1. INTRODUCTION AND STRATEGIC CONTEXT FOR NEW CHARTER GROUP REVIEW1.1 It is clear to most observers and practitioners that the Registered Social Landlord sector isundergoing a period of major strategic change due to a number of factors:

Significant housing growth, including affordable housing growth is expected bygovernment to 2021. Rationalisation of development procurement arrangements with the introduction ofthe partnering programme accounting for a significant majority of all NationalAffordable Housing Programme (NAHP); Growth in the number of large, powerful RSL competitors created via the LargeScale Voluntary Transfer programme. An increasing focus on economy, efficiency and effectiveness following keystrategic reviews such as those conducted for the government by Gershon and

Baker. Pressure from the Housing Corporation to rationalise stock holdings in order toachieve a more coherent and efficient distribution of assets amongst landlords; Encouragement of RSLs to rationalise operations and realise efficiency savings viaconsolidation through group formation.

1.2 The current difficulties in the housing sector and the wider financial situation will increaseorganisations' motivation for merger. In addition, an increasing number of HousingAssociations are facing tight business plans and reduced capacity with an ongoing climateof rationalisation in the sector NCHT will have to consider options for growth anddevelopment.1.3 At the time of transfer, New Charter was the largest stock transfer organisation of the time.Because of the size, the Housing Corporation insisted that the Council's housing stock besplit between two companies, hence New Charter Housing (North) Limited and NewCharter Housing (South) Limited. Before transfer the Council was against such a split ofstock and pressed the Government to change its position. Unfortunately it was notable tosucceed in this and had to proceed with a geographical split of the stock. Since then, theHousing Corporation have changed their position on this and have published significantpolicy guidance on improving the efficiency and effectiveness of group structures the

benefits of mergers and support for organisations to review their current structures.1.4 Following the accession of AKSA Housing Association in November 2006 and the windingup of Property Services in June 2007, there are currently five companies in the groupstructure and following a successful ballot, Gedling Homes will be joining the group inNovember 2008 increasing the group companies to six (figure 1 and figure 2)1.5 It was therefore timely for New Charter to complete a review of its overall structure andcomposition of the Groups Boards. This was completed during the first part of this year,following extensive consultation with the Group Directors, tenants and leaseholders,funders and the Housing Corporation.

C:\Oocuments and Settings\dorothy.moore\Local Settings\Temporary Internet Files\OLK6C\NCHT and New Charter Homes ReportFINAL.doc 7


8/31

2. RESTRUCTURE OBJECTIVES 2.1 The primary aim of the restructure is to better define respective roles of Boards in theGroup - to maintain independence at Trust Board level in developing the strategy for theGroup and to reflect the fact the Trust has the main relationship with the HousingCorporation. Establishing this clearer distinction, it is believed, will enable the Group to

meet its overall objectives and in particular those for future growth and development. Therewill be additional benefits that the Group will seek to achieve with regard to CorporationTax, overall financial viability, improving the group's ability to manage growth, developmentopportunities and administrative efficiencies.2.2 A key proposal of the restructure is to merge the North and South companies to form oneRSL. For tax and other, mainly accountancy reasons, this will involve the Southtransferring all its assets to the North Company; the South Company would then be woundup and the North Company renamed as New Charter Homes Ltd.2.3 It has also been necessary to review the composition of the Trust Board, as currently theNorth and South Boards each nominate a tenant and local authority director to sit on the

Board.2.4 The Housing Corporation has indicated that it wants Trust Boards to consist of 50%independent Directors and that, to qualify for the status, such Directors must be nominatedby the Trust Board and not nominated from a subsidiary. Although the Corporation wouldbe satisfied to see such Directors nominated down to a subsidiary by the Trust.2.5 The business case (Appendix 1) is framed within the context of the Housing CorporationGood Practice Note 11, "Making Groups Work", and in particular is referenced to section4 of that document which outlines the Corporation's expectations in terms of registeredassociations within a Group. Accordingly the analysis considers:

Viability and Efficiency"When considering proposals for mergers and group structures we will expectassociations to have a baseline proposal for efficiency gains to be derived from thenew structure, going beyond a focus on staffing and development procurement ...Associations should have adequate monitoring arrangements in place in order tomeasure efficiencies going forward and also be able to demonstrate how any futureefficiency gains are utilised in improving services for residents". Governance"Our Code expects association boards to be in control. Our registration criteriarequire that within a group, the parent association should have ultimate control over

its subsidiaries" Management"Generally registered subsidiaries should have sufficient resources to enable themto plan and manage their housing services, and deliver these in the context of theirown tenants, subject to budgets fitting the group business plan"

2.6 The attached business case (Appendix 1) considers these elements and recognises that itwill be the role of the Board of New Charter Housing Trust Ltd to monitor the level ofachievement, which will be undertaken by reference to an Action Plan reported to Board.2.7 Consultation has taken place with the Housing Corporation and key stakeholders. Subject

to Housing Corporation consent, it is New Charter's intention that the restructure will beformalised on 1st October 2008 and the merger effective from this date. As part of thisprocess the Housing Corporation has requested a letter of support from the Council.

C:\Oocuments and Settings\dorothy.moore\Local Settings\Temporary Internet Files\OLK6C\NCHT and New Charter Homes ReportFINAL.doc 8


9/31

3. PROPOSED STRUCTURE3.1 The primary aim of the restructure is to "more clearly" define the respective roles of Boardswithin the New Charter Group. The existing group structure is set out at figure 1 with theproposed structure at figure 2.

New Charter Housing Trust Limited3.2 The proposed structure provides for strategic control and direction of the Group through theBoard of New Charter Housing Trust Limited.3.3 It is proposed that the membership of the Trust Board will reduce from 12 members to 10; 6

of whom will be Independent Board Members, 1 tenant, 2 TMBC and 1 Executive.3.4 The Trust Board will be responsible for the overall governance and strategic direction of theGroup and will nominate (from within its own members) an independent representative oneach of the RSL subsidiary Boards.

New Charter Homes Limited3.5 New Charter Homes Limited will be the new name for New Charter Housing North Limited.It will remain a company limited by Guarantee and will be the predominately 'Tameside'stock owning RSL subsidiary. The number of Board members will reduce from 12 to 10with an equal mix of independent, tenant and local authority representatives.3.6 The Board will focus on service delivery to its tenants and residents and specific localissues.

AKSA3.7 There are no proposed changes to this board in the new restructure.New Charter Building Company Limited3.8 As part of the restructure the Board will reduce from 8 to 5. The building arm of NewCharter is not a registered organisation and all directors will continue to be appointed byNew Charter Trust.Gedling Homes3.9 Gedling Homes, a large scale voluntary transfer, will join the group in November 2008 as aRSL stock owning subsidiary, comprising 12 Board members with an equal mix ofindependent, tenant and local authority representatives.

C:\Documents and Settings\dorothy.moore\Local Settings\Temporary Internet Files\OLK6C\NCHT and New Charter Homes ReportFINAL.doc 9


10/31

New Charter Housing Trust Group

TRUST [PARENn BOARD (12)

AKSA COUNCIL INDEPENDENTS TENANTS2 3 4 3

i 2 x Directors(1 x Tenant1 xCouncil)

I South (12)Tenants,Council,Independent


11/31

NEW CHARTER HOUSING TRUST GROUP - PROPOSED STRUCTURE

Trust Board(Parent RSL, Company Limited by Guarantee)

10 Directors6 Independents 1 Tenant

2TMBC 1 Executive

New Charter Homes LtdL subsidiary, Company Limited byGuarantee)

10 Directors3 Independents

(1 nominated by Trust) 3 Tenants 3TMBC 1 Executive

Gedling Homes(RSL subsidiary, Company Limitedby Guarantee with Charitable Status)

12 Directors4 Independents

(1 nominated by Trust) 4 Tenants 4GBC

1_________________________________1

Aksa(BME RSL subsidiary, Industrial &Provident Society with CharitableStatus)

15 Directors1 Executive 14 Non-Executive

(1 nominated by Trust and a maximum of 1/3 tenants)

Building (Non-RSL subsidiary, Company Limited by Guarantee)

5 Directors 4 Independent 1 Executive

Figure 2

C:\OOGuments and Settings\dorothy.moore\Local Settings\Temporary Internet Files\OLK6C\NCHT and New Charter Homes Report FINAL.doc 11


12/31

5. CONCLUSION AND IMPLICATIONS OF CHANGES FOR TAMESIDE5.1 New Charter has ambitious plans to grow the number of homes it owns from around 18,000now to 30,000 over the next 5 years. The Housing Corporation, the principle regulatory andinvestment body for Registered Social Landlords will support growth where the overall

efficiency, economy and effectiveness of organisations is enhanced through any changes.In response to this environment New Charter Housing Trust has completed a strategicreview of it organisation and following extensive consultation with the Corporation and keystakeholders is proposing to restructure.5.2 There are a range of benefits being sought from the restructure both financial and nonfinancial including, savings and corporation tax, in terms of overall financial viability, theability to cope with future growth and development opportunities and administrativeefficiency.5.3 Under the restructure New Charter Housing Trust (parent) will take overall responsibility forthe strategy, vision and achievement of the group, particularly growth and development,

with each subsidiary having a clearly defined role in respect of the day-to-day operationalmanagement and the delivery and improvement of services to residents. When consideringopportunities for growth and development the trust have set key criteria for success. Theseare: The outcome must be demonstrably in the best interest of the groups tenants That it should strengthen the position of the group And that it should improve efficiency and effectiveness of overall service delivery.

5.4 The group will have opportunities for growth through the admissions of other companies,merger, stock transfer initiatives, new developments and other partnership arrangements.These could include inviting smaller organisations to join the group, the building of adominant regional presence, the combination of inter-regional groups, combining to form alarger maybe national group. The advantages and disadvantages of each option arecomplex, as will be the options for progressing these. Whilst key criteria for success havebeen set, the decisions for growth and development will lie with the Trust Board with theproposed changes in their relationship and roles between it and its subsidiaries.5.5 With regard to the new Trust Board the Housing Corporation requires that at least 50% ofthe directors are to be independent. The review proposes 10 directors for the new TrustBoard of which 6 are independent, 1 tenant, 2 council and 1 executive director. Thereduction in Tenant Directors to 1 is disappointing and the Council should ask New Charterto increase this to 2 at its AGM.5.6 Under the proposed changes there is a reduction in the number of Council nominations tothe New Charter Trust and New Charter Homes Boards. With the proposal to nominateone Director from the new trust board to sit on each subsidiary RSL there will be a slightweakening of the constituencies on the New Charter Homes Board. Currently on the NewCharter North and South Boards there are one third independents (4) one third tenants (4)and one third Council nominees (4). Under the strategic review New Charter is proposingthat there are 10 directors on New Charter Homes, 3 independents, 3 tenants and 3 councilnominees and 1 nominee from the New Charter Trust Board.5.7 The proposed restructure is in response to the strategic changes New Charter faces in theRegistered Social Landlord sector. If New Charter is successful it will strengthen it as an

organisation and this should have a positive impact on its tenants in Tameside and as oneof the major employers the wider economy of the Borough. Clearly if New Charter does notgrow and prosper there maybe the opportunity for other large Registered Social Landlord

12


13/31

organisations to explore the control of the group and if this happens the local focus onTameside's social housing, within a larger organisation may diminish.5.8 Currently as a result of vacancies and resignations of Council nominees to existing boardsthere are 6 active directors on the Board of New Charter companies. These are Councillor

Ged Cooney and Miss Maria Bailey on the Trust Board, Councillor Jim Middleton,Councillor Margaret Down and Cllr Martin Wareing and Gordon Tow on New Charter Northand South Boards.

5.9 With the reduction in the number of directors required it is proposed that Cllr Ged Cooneyand Ms Maria Bailey are nominated to the new trust board and Cllr Martin Wareing, Cllr JimMiddleton and Cllr Margaret Downs are nominated to the New Charter Homes Board attheir Annual General Meeting on September 23 Td

13


14/31

14


15/31

CONTENTSExecutive summary 3 1. Introduction 3 2. Objectives 4 3. Benefits 6

3.1 Efficiencies 6 3.1.1 Financial 6 3.1.2 Non-Financial 7

3.2 Governance 8 3.3 Growth and Development 10 3.4 Rent Restructuring 10 3.5 Decent Homes Standard 10 3.6 Equality and Diversity 10 3.7 Risk Analysis 10 3.8 Monitoring and Review of Anticipated Benefits and Efficiencies 10

4. Stakeholder Consultation 11 4.1 Board Members I I 4.2 Tameside MBC 12 4.3 Tenants and Leaseholders 12 4.4 Funders 15 4.5 Regulators 16

5. Proposed Struc ture 16 5.1 Governance Considerations 16 5.2 Structure and Reporting Responsibilities 18 5.3 Board Composition and Skills 21 5.4 Departure Packages 22

6. Appendices6.1 Existing Structure of the Group6.2 Memorandum & Articles of Association

a) New Charter Housing Trust Ltd b) New Charter Homes Ltd c) Gedling Homes

15


16/31

d) New Charter Building Company Ltd e) (Rules) Aksa Housing Association Ltd

6.3 Intra-Group Agreement6.4 Intra-Group Service Level Agreement6.5 Tenant/Leaseholder Consultation Newsletter and Board report6.6 Terms of Reference

a) Operations Committee b) Finance Committee c) Audit Committee

16


17/31

2.1

Executive summaryNew Charter was created at a time of concern about monopoly landlords. A split of the transferred homes to two stockholding companies was agreed, although this was contrary to tenants' views.Losses under Protected Right to Buy and Right to Acquire have stabilised, and the Group has grown throughacquisition. More growth is planned. A review of our structure shows real savings can be made, with no detriment toservices to customers. Central to our proposal is the merging of the two stock-holding companies. By doing this,savings in Corporation tax liability and auditing fees of over 2m can be identified. A streamlined Board structure willconcentrate the strategic direction in the Trust, while allowing the subsidiary landlords to excel.1. IntroductionNew Charter was formed in 2000 following the large scale voluntary stock transfer of 16,361 homes from TamesideMetropolitan Borough Council. At tiroe of transfer, New Charter was Britain's biggest stock transfer organisation.Because of the size, the government insisted the housing stock was split between two companies. Further consultationwith tenants produced a geographic division of homes, New Charter Housing (North) Limited and New CharterHousing (South) Limited.In November 2005 Aksa Housing Association, a BME organisation with around 650 homes in Oldham, Bury andManchester, as well as Tameside, joined the Group.The New Charter Group (including Aksa) is regarded by the Housing Corporation as a "viable, well governed and wellmanaged association with green light statns in all three categories" (Housing Corporation Assessment, October 2007).Following the accession of Aksa Housing Association to the Group in 2005, the winding up of Property Services inJune 2007 and the proposed accession of Gedling Homes to the Group in November 2008 it was felt to be anappropriate tiroe to review the overall structure and composition of the Boards. This decision was supported by theGroup's Lead Regulator at the Housing Corporation.The reality is that the split between New Charter Housing (North) Ltd and New Charter Housing (South) Ltd. showeddifferences only in the first year after transfer. Since then, consensus between the two stock-owning companies hasproduced parallel policies and procedures. The division resulted in expensive duplication of records and accounts withcommensurate additional costs of aUditing. Since 2001, the efforts to improve customer satisfaction have beencollective, and there have been no discemable variations in the rise of tenant satisfaction for the last five years. At 92%,we have been at the top of the English league table of large General Needs landlords for three successive years.The time is right to propose this merger.The existing structure is at Appendix 6. \.

2. ObjectivesStrategic Context

It is clear to most observers and practitioners that the RSL sector is undergoing a period of major strategic change dueto a number of factors: Rationalisation of development procurement arrangements with the introduction of the partnering programmeaccounting for a significant majority of all National Affordable Housing Programme (NAHP); Growth in the number of large, powerful RSL competitors created via the LSVT programme. An increasing focus On economy, efficiency and effectiveness following key strategic reviews such as thoseconducted for the government by Gershon and Baker. Pressure from the Housing Corporation to rationalise stock holdings in order to achieve a more coherent andefficient distribution of assets amongst landlords;

17


18/31

Encouragement of RSLs to rationalise operations and realise efficiency savings via consolidation throughgroup formation.

The companies have a shared view of the industry sector and operating environment which underpins our strategicdecision to develop the New Charter Group.2.2 Group ObjectivesIn summary the objectives of the New Charter Group are as follows: Growth - to evolve into an RSL group managing 30,000 units within the next five years; Quality - providing quality housing products and services across the full range of the Group's activities; Improved efficiency - through combined provision of central services and reduced administrative overheads; Solid IT platform - The development of effective IT systems throughout the Group leading to improvements

in efficiency and improved service delivery; Develop a strategy to encourage an d welcome new partners to the Group - in relation to tenants, asset

management and staff. This is geared to encouraging both traditional RSLs and emerging stock transfervehicles; To be acknowledged as a regional development vehicle and a key Housing Corporation partner through

Joint Venture North; Promotion of equality an d diversity throughout the Group; To be an employer of choice.In endeavouring to achieve these objectives the Group has at its heart five key aims - known as the "51's":

Improve Invest Image Involve InnovateHaving an approach which addresses these aims enables the Group to move forward effectively.2.3 Restructure ObjectivesThe primary aim of the restructure is to better define respective roles of Boards in the Group - to maintain independenceat Trust Board level in developing the strategy for the Group and to reflect the fact the Trust has the main relationshipwith the Housing Corporation. Establishing this clearer distinction, we believe, will enable the Group to meet its overallobjectives and in particular those for future growth and development.The main proposal of the restructure is to merge the North and South companies to form one RSL. For tax and other,mainly accountancy reasons, this will involve the South transferring all its assets to the North company; the Southcompany would then be wound up and the North company renaroed as New Charter Homes Ltd.It has also been necessary to review the composition of the Trust Board, as currently the North and South Boards eachnominate a tenant and local authority director to sit on the Board.The business case is framed within the context of the Housing Corporation Good Practice Note II, "Making GroupsWork", and in particular is referenced to section 4 of that document which outlines the Corporation's expectations interms of registered associations within a Group. Accordingly the analysis considers: Viability an d Efflciency

"When considering proposals for mergers and group structures we will expect associations to have a baselineproposal for efficiency gains to be derived from the new structure, going beyond a focus on staffing and18


19/31

development procurement .. Associations should have adequate monitoring arrangements in place in order tomeasure efficiencies going forward and also be able to demonstrate how any future efficiency gains areutilised in improving services for residents".

Governance"Our Code expects association boards to be in control. Our registration criteria require that within a group,the parent association should have ultimate control over its subsidiaries"

Management"Generally registered subsidiaries should have sufficient resources to enable them to plan and manage theirhousing services, and deliver these in the context of their own tenants, subject to budgets fitting the groupbusiness plan"

This document considers these elements and recognises that it will be the role of the Board of New Charter HousingTrust Ltd to monitor the level of achievement, which will be undertaken by reference to an Action Plan reported toBoard.Consultation has taken place with the Housing Corporation and key stakeholders. Subject to Housing Corporationconsent, it is our intention that the restructure will be formalised on 1st October 2008 and the merger effective from thisdate. This will help in preparation for Gedling Homes' accession to the Group on 3rd November 2008.3. BenefitsThere are a number of immediate benefits as a consequence of the restructure, both financial and non-financial. Therewill also be additional benefits we will seek to achieve, principally with regard to Corporation Tax, and also in terms ofoverall fmancial viability, the ability to cope with future growth and development opportunities and administrativeefficiency.3.1 Efficiencies3.1.1 FinancialAdvice has been taken from both KPMG and Baker Tilly who have said there is no reason why combining New CharterHousing (North) and New Charter Housing (South) should not be accounted for using Merger Accounting, as per FRS6.With merger accounting, the carrying values of the assets and liabilities of both parties are not required to be adjusted tofair value on consolidation. The results and cash flows of North and South companies should be brought into thefinancial statements of the combined entity (New Charter Homes Limited) from the beginning of the financial year inwhich the combination occurs. The corresponding figures should be restated by including the results for all thecombining entities for the previous period and their balance sheets for the previous balance sheet date (i.e. so it lookslike the North and South companies have always been together).We have considered the V AT implications of the merger of the North and South companies. There will be no change ofbusiness activity, so there will be no impact on the VAT position for the Group.Further tax advice from Deloitte has confirmed that the transfer of assets from the South to the North company can takeplace at 'no gain, no loss '. There will be no capital gains tax liability.The capital gains tax arising in the South company from the whole of 2007/08 and the six months of 2008/09 can beoffset against the losses accumulated in South. So the winding up of the South company will result in a nil tax liabilityposition.The largest advantage from our proposal is in Corporation tax liabilities already incurred and which can now be reexamined. Merging the two companies means we will resubmit the 2005/06 and 2006/07 corporation tax computations,taking into account Rollover relief claims for the capital gains in the North company. The following summarises thepotential tax liability which now can be avoided:Year Capital Tax Liability

Gains at 30% 19


20/31

2005-061,827,430 548,2292006-073,043,428 913,0282007-08 1,473,949 442,185Total 6,344,807 1,903,442We can also utilise the capital gains tax arising in North for the whole of2008/09.The resubmission of corporation tax computations for 2005106 and 2006/07 will bear an additional cost from Deloitte ofapproximately 1000. Despite this, we still expect a net saving in its fees of around 4000.We have checked the position on pensions, but there will be no effect arising from this proposal. Employees areemployed by New Charter Housing Trust Limited, rather than employees of the North and South companies.Further detailed breakdown of efficiency savings forecast are at section 5.1.1 (Viable).3.1.2 Non-FinancialBenefits include: A reduction in the number of Non-Executive Directors. The actual numbers will be determined following theselection of those Directors whose skills match the necessary requirements for the new structure, but 16 may belost; A re-defming of the role of each Board, particularly that of the Trust Board, to ensure it is fulfilling its role as theprimary Board responsible to the regulator; is properly monitoring the activities of the subsidiaries within theGroup; identifYing risk and ensuring management of the same and enabling each company to perform within itsparameters of operation; We expect the new company will provide a greater service focus for Tameside tenants and customers and will

lead to stronger brand identification for Tameside service delivery at a time of growth in the Group; An amount is set aside in the Group business plan for new development. The joining of the two companies willaid the development process by purchasing the new acquisitions in the name of New Charter Homes.

Allowances will be claimed under the one company, New Charter Homes; The joining of the companies will also meet the requirements of audit recommendations where auditors haverequested that separate bank accounts are held for each company.3.2 GovernanceBringing together New Charter Housing (North) and New Charter Housing (South) as New Charter Homes will refmeoverall governance and management arrangements. This provides the opportnnity to consider overall Group strategy ina far more directed manner than has previously been the case. In particular it is confirmed that the changes willconform to GPNll:The new structure will deliver effective neighbourhood management and improved services to current and futureresidents and others (see 3.1.2 above).The Group has, and will continue to have capable leadership and control. As referred to at 3.1.2 above. The Trust, asParent, is a non stock-holding RSL. It has the ultimate power - in accordance with the newly drafted and Groupapproved Intra-Group Agreement - to remove any and all of any subsidiary's board members and to appoint a newboard.In line with the Intra-Group Agreement, each board has autonomy to act in accordance with its Trust approved BusinessPlan. However, the Trust may utilise its powers, contained within the Intra-Group Agreement, to intervene as may berequired to ensure the Group remains viable and well-governed. Each board within the Group is aware of these residualpowers and the Trust recognises the significance of its role in being responsible for the Group.

20


21/31

The Building Company within the Group is, of course, a non-registered body, incorporated as a company limited byguarantee. The liability of the Building Company is ring-fenced to the Building Company. The operation of the same iscontrolled by the Trust through the Trust approving the Business Plan and Risk Profile of the Building Company, aswell as monitoring its operation on a regular frequency. The Trust remains vigilant to ensure that the BuildingCompany does not pose a risk to the Group in terms of either viability or reputation.One-third of the Trust Board shall be independent and the constitutional documentation reflects the need for there to beone-third independent representation at quorum level for board and general meetings. The arrangement for the BuildingCompany is slightly different because the Trust appoints all the board members and is the sole Member for generalmeeting purposes.To reinforce the control exercised by the Trust, as Parent, over the RSL subsidiaries, the Trust will nominate oneMember of each subsidiary RSL board from its own composition. Due to the primary and ultimate control of theBuilding Company by the Trust, this arrangement is not replicated in respect ofthis company.The above control mechanisms (Right of Parent to appoint or remove Directors, or Members of a subsidiary; Right ofintervention by the Trust; Right of nomination; Right of trust to monitor activities; responsibility of a subsidiary toconform with Trust requests and, particularly, to prepare an Annual Business Plan for approval by the Trust) are allmatters legislated for and regulated by the various constitutional documents in place, i.e. Memorandum & Articles;Intra-Group Agreement; Board terms of Reference.As importantly to note is the fact that none of the powers of the Trust are exercised in such a way as to act so as torestrict, inhibit, prohibit or distort the role, or activities of any subsidiary so as would prevent a subsidiary fromeffectively discharging its responsibilities within the Group and to all stakeholders.3.2.1 Focused BoardsThe Terms of Reference for the Trust, and indeed for each Board within the Group, set - out very clearly the respectiverole of each company. Overall responsibility for the strategy and vision of the Group is vested in the Trust as Parent,whilst each subsidiary has a defmed operational role (including strategy for its areas of activity) in respect of thedelivery of its services. The Terms of Reference for each board will be reviewed once the newly constituted Boardsmeet (post approval to the restructure). The Trust will take a primary role in this review and for itself will be looking toensure its conformity with GPNll and reinforcing its own regulatory role within the Group. In particular the Trust ismindful that, in line with the NHF Code of Governance, it wishes, amongst other matters, to reserve to itself certainmatters pertaining to strategic, risk and monitoring profiling as well as monitoring.Following from the above it is an aim of the restructure that the RSL Subsidiaries will be better able to focus onimproving services to tenants and customers, be responsive to tenant's needs; develop Resident Involvement whilstretaining operational Autonomy as described above.3.2.2 Clearer Reporting ResponsibilitiesAll that has been expressed above (in this section 3) leads to a refmed focus for each Board which will mean thatreporting lines will also be much clearer. One of the first tasks of the newly constituted Trust board will be, withmatters referred to above, to set out its requirements for subsidiary board reporting to it. The aim is to ensure therequirements of GPNll, see above, together with the other matters affecting reputation; governance and viability arecovered in regular reports to the Trust. It is envisaged that a composite report will be prepared on at least on a regularfrequency basis to ensure the Trust is, at any time, full aware of not only the trading position and levels of performanceof each company but also alerted to any viability, or reputation issues in suffIcient time to allow meaningfulintervention.3.3 Growth and DevelopmentWhen the Trust Board considered the options for growth and development opportunities they set key criteria forsuccess. These were that: the outcome must be demonstrably in the best interests of the Group's tenants; that it should strengthen the position of the Group; and that it should improve the effIciency and effectiveness of overall service delivery.

21


22/31

It is envisaged that the Group will continue to grow through admission of new entrants, merger, stock transferinitiatives, new developments and other partnership arrangements in the next few years.We believe that a more streamlined, focused structure will assist with the delivery of the growth and developmentobjectives and enable the Group to achieve its agreed strategic objectives.3.4 Rent RestructuringRent restructuring will not be impacted by the restructure proposals.The Housing Corporation has indicated in the Assessment published in October 2006 that they expect the Group tomeet convergence by the specified dates (2012 for General needs and 2013 for Sheltered). This remains part of ourcurrent Rent Plan.Convergence of rents to a level of "Target Rent +/- Tolerance" is achieved for 14,296properties, (99.60% of the stock). There are 43 properties falling below the lower limit and11 above the upper limit. Tenancies ending will continue to reduce this already smallnumber. As previously, we will keep the Housing Corporation informed.3.5 Decent Homes StandardAlthough the Decent Homes Standard was introduced after the original transfer Offer to tenants was made, the physicalimprovements we have undertaken and some minor changes to our investment progranune mean we will have all homesto standard by 2009/10. The merger proposals will have no effect on this progress.3.6 Equality and DiversityBoth New Charter Housing (North) and New Charter Housing (South) comply with the Housing Corporationrequirements in respect of Equality and Diversity. All companies in the Group have given recent attention to this areain our self assessment, trying to measure against three star organisation's performance. This reflects our overallobjectives (see section 2.2).One of the objectives in reviewing the structure was to ensure that each of the Boards was representative of thecommunity in which it operates. Consideration has therefore been given to all equality and diversity issues includingage, ethnicity and gender as well as the skills of individual members when assessing the composition of the boards. Themerger will name this easier for New Charter Homes to check, as comparative data is more readily available at LocalAuthority level.3.7 Risk AnalysisWe believe that the combination of the companies (and successful track record) of New Charter with an LSVT with amixture of stock holdings will improve the overall risk profile. New Charter Group will enjoy greater operatingcapacity and will thus be better placed to withstand adverse risk scenarios than each RSL in isolation. Realisation ofanticipated efficiency savings will strengthen the Group's financial position, providing improved capacity to absorb anydeterioration in economic variables and other fmancial risks3.8 Monitoring and Review ofAnticipated Benefits and EfficienciesWhere the anticipated benefits are the elimination of the duplication of processes and procedures there will beimmediate benefits gained The group has a robust monthly fmancial monitoring procedure in place which will identifYfinancial efficiency savings and ensure these resources are redirected to the front line services such as Anti-socialbehaviour and Crime prevention. Efficiency gains will also be utilised to facilitate the integration of Gedling Homesinto the Group. We anticipate reporting progress to the Trust Board.4. Stakeholder Consultation4.1 Board MembersBoard members of the Trust, Building Company, New Charter Housing (North), New Charter Housing (South), Aksaand Gedling Homes have all considered proposals for restructuring the Group over the course of the past 12 months,both as individual Boards and collectively.

22


23/31

In particular, the Group Board Conference on 29th & 30th November 2007 provided Directors with the opportunity togive detailed consideration to the proposals in a more relaxed environment without the time restraints associated withBoard meetings. Attendance at the Conference was high with all Boards in the Group well represented. It was also animportant opportunity for Directors to meet with the Shadow Directors of Gedling Homes.There appeared to be broad consensus of the need for the change and the rationale that lay behindthe proposal. Some of the points of discussion are summarised below: The Parent (Trust) Board needs to be much more strategic and smaller in size. A new merged Board for Tarneside could clearly focus on operational issues for the LSVT stock in theBorough. There was broad understanding and appreciation ofneed for the nomination downward route, but concern overapparent loss of subsidiary voice at Trust Board level. The Aksa Board Members were anxious to ensure the apparent reduction in influence at Parent Board is offsetby much greater activity within the community to minimise potential negative messages.

Current arrangements for Group Committees should continue with an increased expectation that subsidiarieswill nominate to Committees balanced by the need to keep the skills mix right. It was felt very important to recognise and retain best of current Board Members. New Boards to be product ofcurrent skills audit, the present round of appraisals, and National Housing Federation and Housing Corporationguidance. The process should be an initial invitation to existing Board Members, with formal application and interview.The need to ensure a good gender and diversity mix was recognised. There was support for possible use ofwider assessment centre techniques. We agreed to investigate the use of external independent advisors in therecruitment process. There was a need for more regular communication between Boards and Committees.Directors were keen to see as early a resolution as possible; recognising the need to carry out tenant consultation over asix week period.The issues raised by Directors were taken into consideration throughout the restructure process and following theconclusion of all stakeholder consultation formal approval to proceed was obtained from the Boards at the joint meetingon 21st August 2008.4.2 Tameside Metropolitan Borough Council (TMBC)The Group Chief Executive led the consultation with TMBC which commenced in February 2008. As part of thisconsultation the overall proposal and reasoning behind the restructure, the Housing Corporation's expectations asdetailed in GPN 11 and how TMBC would be directly impacted by the restructure proposals were outlined.We received confIrmation that TMBC were satisfIed with the restructure proposals on 19th May 2008.4.3 Tenants and LeaseholdersWe consulted the Group's tenants and leaseholders over a six week period by issuing a special "New Charter News"newsletter. This was posted to all tenants and leaseholders, and explained why we were considering the changes,reassured tenants about what would not be affected and laid out a diagram of board representation and relationships(see appendix 6.5).Although our proposals did not include changes to Aksa's Board, we posted the newsletter to all Aksa tenants as thechanges to the Trust affect these customers too.Gedling tenants were not consulted as they have yet to transfer to the Group.

23


24/31

We invited tenants and leaseholders to tell us their views in various ways. A simple form included on the back page ofthe newsletter could be posted back, or dropped off at any of our Customer Access Centres (shops). Customers couldalso e-mail views to a dedicated address.A large print version of the special issue was sent to the 300 tenants registered for the service.A talking version ofthe newsletter was sent on CD to the 64 tenants who have requested this service. We dedicated ananswer phone to take any responses from this group, who are mainly blind or visually handicapped.The newsletter was also advertised as available in Braille. No one took up this offer; usually, the CD caters for those weknow can read Braille.ResponsesUnsurprisingly, our six week consultation did not produce many responses. Experience from other landlords proposinggovernance changes is similar, and suggests that either we failed to inspire tenants to comment, or that they did not seeany issues of concern to comment on.We had four e-mail responses, including one sent direct to the Group Chief Executive. One of these was not from atenant and raised issues irrelevant to our proposals. All had an e-mail acknowledgement or response. We received 18 completed or part completed forms. Some of these had an immediate telephone response, where the question raised was simple to answer. One respondent sent us 10 pages of comment. We did not receive a formal response from the Tenants' Federation, although the consultation coincided with the launch of a new Tenant Management Structure. The analysis which follows is of the 21 responses on our proposals. Analysis Location of respondents Most were from Ashton; only one Aksa tenant responded.

Responsesl1li Ashtonl1li Dentono Dukinfieldo Hydel1li Stalybridgel1li Longdendalel1li Mossleyl1li Oldham

Support Most were in favour.

24


25/31

In fal


26/31

ConclusionsThere were very few responses, and it would be unrealistic to suggest changes to the proposed structure based on thisexercise alone.All respondents who raised issues received a written response in mid-August. The next regular newsletter will include aQ&A section to inform all tenants and leaseholders of the outcomes of the consultation exercise and the next steps. Thiswill also help to provide customers with a bit more explanation on the relative strengths of the Group structure; andparticularly to refute the claim that Aksa or Gedling Homes could take over control of New Charter Homes.4.4 FundersNew Charter currently enjoys a Loan Facility (syndicated with the Nationwide BS and the Royal Bank of Scotland)amounting to 290m. Whilst the Group Loan Facility has always reflected the two borrowing subsidiaries, North andSouth, the Funders approach has been to treat these as a single entity for covenant compliance purposes. Aksa hasfacilities with the Royal Bank of Scotland and Dexia amounting to l3m in total, 2.4m of which has already beenrepaid..Throughout the process all Funders have been kept aware of the proposal to restructure the Group. It is also worthwhilenoting that the Funders were even willing to tender for Gedling Homes' Loan Facility which in the current climate wasencouraging and a reflection of the confidence oflenders in the fmancial position of the Group overall.In terms of the Group Loan Facility with Nationwide BS and Royal Bank of Scotland a formal analysis (in loan profileand covenant terms) of the impact of the merger was provided. In summary this shows that the Loan Profile remainsvirtually unchanged:

26


27/31

---

FUNDING PROFILECun-en t

Business 'Plan(Nor th & New Char te r

South) HOInes Variat ion '000 '000 '000

2008/09 260,178 260,168. -11. 279,477 279,468009/10 -92010/11 -1 187,:z()() .. :Z.8.?,.:Z552011/12 289,012 289,002 -102012/13 287,931 -102 8 7 , 9 2 ~ - - - - - - - ~ 2013/14 284,272 -68.",:Z()() ........ -4 2014/15 280,199 280,1952015/16 273,938 273,942 4-_.2016/17 11:z()(),217 :z66,2:z!) I 2017/18 256,918 256,938 19

247,521018/19 246,945 -576-._ww 236,840 236,233_ _019/20_. -607-

2020/21 226,958 226,325 -6342021122 215,318 214,657 -6612022/23 ___ 207,070 207,070_w 0. -----------::- 2 0 i 3 i 2 ~ 198,807 198,807 02024/25 18.9 ,473 189,473 0

-_. 2025/26 177,600 _ _ _ . 177 ,-()QQ 02026/27 167,001 167,001 02027/28 ,,-_. 154,564 154,564 02028/29 1 1 4 , 3 ~ ~ .__ " ' ! ' ! " ~ 7 3 --_. 0

. 2029130 99,760 99,760 02030/31._"'"'---",._----". 99,760 - 99,760 02031132 _____ 2 6 , 2 ( ) ~ .._ - - - - - - - 56,26!1 -

02032/33 43,368 43,368 02033/34-- - 18,384 1 8 , ~ _. 02034/35 ------ 0 -- 0 - 02035/36 0 0 02036/37 0 0 02037/38 0 0 0

The variations in the years 2018/19 - 2021/22 are a direct result of the Fixed Loan profile.In summary, the proposal is effectively neutral in funding terms and in this context: Confirmation has been received from funders that there will be no repricing of existing facilities as a result of the

restructure (and additionally also Gedling Homes joining the Group). As such the current Loan Facility terms willremain unchanged. There is no adverse impact on the financial projections and consequently no issues surrounding CovenantCompliance.The Aksa funding facility is separate from the Group Loan Facility and consequently there is no impact from thatperspective.4.5 RegulatorsThe Financial Services Authority are the regulators for Aksa Housing Association, which has charitable status. Theyhave been consulted about the merger but changes affecting the Aksa board of management are not effective at this timebut the authority will be kept informed of any future changes. The Charity Commission will be informed of anychanges which may impact on the future integration of Gedling Homes, although this is not due to take place until 3rdNovember 2008.

27


28/31

5. Proposed Structure5.1 Governance ConsiderationsIn developing the structure, consideration has been given to the Housing Corporation's requirement to ensure that theproposed arrangements satisfy the regulatory framework and provide for viability; proper governance and propermanagement.5.1.1 ViableThe restructure will mean that the group will become a more viable organisation through operating more efficiently,benefiting from savings achieved by having more effective processes in operation thus reducing the amount ofduplication. Anticipated savings in the first year amount to 103k. These savings will be redirected to front lineservices and will support the inclusion of Gedling Homes into the group. The main benefits will be achieved throughtax savings from previous years, although we expect to see savings from coming years too. Losses will be utilised fromthe North company to support the combined company and delay the inevitable time when New Charter Homes will bein a tax paying position.In addition there will be financial benefits and efficiencies gained particularly from the restructure of the boardstructures which will save the group 63K per annum and savings from back office services where currently processesare duplicated of 40k per annum. These include systems, reporting, processing and any company relatedsubscriptions. The time saved in carrying out a number of these processes will be utilised by the integration of GedlingHomes into the Group.

Efficiency SavingsImmediate Annually

SystemsSystems and reconciliations 427 427ReportingQuarterly funding information 3,195 3,195Annual Accounts 4,792 4,792Cost of audit 13,000 13,000Subscriptions and returns 6,505 6,505Monitoring 7,408 7,408Reporting 2,154 2,154Payroll - Payment to Board Members 62,523 62,523Revenues - processingCheque printing 3,133 3,133

103,136 103,136

Although we have investigated other areas of activity where savings could be achieved such as Insurance and TreasuryManagement, these are already delivered as Group services and efficiencies gained.5.1.2 Well GovernedDetail of the Group's governance proposals is set out in section 3 above, and is not repeated here. But we restate theemphasis that the Trust has striven to achieve an equilibrium within the Group. On the one hand, it provides autonomyto each subsidiary operating within its approved Business Plan and Terms of Reference; on the other hand, eachcompany acknowledges the interdependency within the Group and the strategic, regulatory role of the Trust.5.1.3 Properly Managed

28


29/31

The proposed structure provides for strategic control and direction of the Group through the Board of New CharterHousing Trust Ltd.Relationships between the group and subsidiaries and between subsidiaries will be set out in the Intra-Group Agreementwhich is contained at appendix 6.3. The Intra-Group Agreement is a fundamental mechanism, for ensuring that intercompany relationships and transactions have a sound formal basis and will address the following matters:

A statement of group objectives; Group rules and the Board (addressing constitution and stakeholder representation); Group members' covenants to the group; The Group's covenants to members; Provision of information and liaison between parties; Group member rules and Boards (dealing with the key powers - to appoint to member Boards); Exercise of step in rights (the key power of the Group - to remove Board Members in extreme circumstances); Admission of new members to the Group; Employees (employment arrangements, TOPE etc); Stock management arrangements; Services (arrangements for the purchase and sale of services); Exit; Duration and termination; Dispute resolution.

The Boards of all the RSL subsidiaries recognise that key powers must be credited to the Group Parent body and thatthe Parent is required to be in a position to exercise control over its subsidiaries via the appointment and removal ofBoard Members.We consider it important to achieve an appropriate distribution of power between group members and create agovernance framework that potential new entrants will regard as attractive.5.2 Structure and Reporting ResponsibilitiesFollowing from section 3 above, the proposed structure will support an appropriate distribution of responsibilities whichwill be conducive to effective governance. The Memorandum and Articles of each company can be seen at Appendix6.2. Please note these will be reviewed by the newly constituted Trust Board and may be revised further in line with thematters outlined at section 3.5.2.1 New Charter Housing Trust LtdNew Charter Housing Trust Limited (the Parent) is a company limited by guarantee, and is registered with the HousingCorporation, albeit as a non-stockholding entity.It is proposed that the membership of the Trust Board will reduce from 12 Members to 10; six of whom will beIndependent Board Members.The Trust Board will be responsible for the overall governance and strategic direction of the Group and will nominate(from within its own members) an independent representative on each of the RSL subsidiary Boards.5.2.2 New Charter Homes LtdNew Charter Homes Ltd will be the new name for New Charter Housing (North) Ltd. New Charter Homes will remaina Company Limited by Guarantee and will be the predominately 'Tameside' stock owning RSL subsidiary.The number of Board Members on the Board will reduce from 12 to 10 with an equal mix of independent, tenant andlocal authority representatives.The board will focus on service delivery to its tenants and residents and specific local issues.5.2.3 Aksa Housing Association LtdAksa Housing Association is an Industrial and Provident Society with charitable status. It is a BME RSL subsidiarywith stock in Oldham, Bury, Manchester and Tameside.

29


30/31

At this stage there are no proposed changes to the size of Aksa's Board, although it has been agreed that furtherconsideration will be given to this issue downtime.As a subsidiary of the Group the board will focus on service delivery to its tenants and residents and specific localissues.5.2.4 New Charter Building Company LtdNew Charter Building Company is the Group's only subsidiary which is not registered with the Housing Corporation. Itis a Company Limited by Guarantee and is responsible for delivering investment and repairs. The Building Companyalso brings funds into the Group through the business it undertakes for external clients.Although the Building Company is not registered with the Housing Corporation, as a Group subsidiary it is stillexpected to comply with the spirit of the Group's regulatory requirements, in particular those requirements relating toSchedule I of the Housing Act 1996. It is recognised that the work of the Building Company can have huge reputationalconsequences for the Group. To date these have been extremely positive and it is anticipated that this will continuefollowing the restructure.As part of the restructure process the Building Company's Board will reduce from 8 to 5 Board Members.5.2.5 Gedling HomesGedling Homes is due to join the Group in November 2008 as a Company Limited by Guarantee with charitable status. It will be an RSL subsidiary owning stock in the Gedling borough ofNottingham. Gedling Home's Board will consist of 12 Board members made up of an equal mix of Independent, tenant and local authority representatives. As a subsidiary of the Group, the board will focus on service delivery to its tenants and residents and specific local issues.5.2.6 Group Committees There will be three Group Committees which will be specifically tasked with the oversight of key areas of activity: Operations Committee - the formulation of strategic direction and executive review Finance Commit tee - financial control and management Audit Committee - risk management and control Membership of the Committees will consist of representatives from the various Boards within the Group based on theindividual's skills and experience relevant to the work of the Committee. Their terms ofreference are at Appendix 6.6

30


31/31

5.3 Board Composition and SkillsIn considering the difficult question of which Non-Executive Directors should remain on the Boards it was feltthat there was no scientific method which could readily be applied to the process in a totally clinical way whichwould provide a precision result.It is important to note that, notwithstanding the composition of the RSL Boards (including tenancy constituencyand Council nominee), it is the intent of the Trust Board to achieve a board composition which refiects the skilland experience requirements ofany particular board.As fur as possible the following skills, levels and areas of experience and those hygiene matters of attendance,etc, set out below have been at the forefront ofour consideration:Skills and Experience Senior management experience of medium/large organisation Practical experience of HA's main client groups Active involvement in the key networks in the main communities in which HA operates Capital project management Housing management Financial management Strategic management Treasury management Housing needs that the Association aims to meet Resident needs and concerns Social and community affairs, including rural issues and housing needs Skills and experience Member's response General business skills including the management of staff, properties and contracts Legal matters (i.e. commercial/property law) Building industry, and contracting Property development Managing care and support Community relations and needs, including equal opportnnities Public relations Management of information technology Working with local authorities Personnel management Chairing and facilitating meetingsOther Considerations Attendance Contribution at meetings Equality and Diversity (gender, ethnicity, age etc) Length oftime on Boards (mix of experienced and newer Board Members) Skill composition required.5.4 Departure PackagesInevitably the Group will lose a number of Non-Executive Directors, Some of whom will have been on theBoards since transfer in 2000. We would like to acknowledge the contribution and commitment of theseDirectors over the years with a small gift/sum of money. However this will be within the 300 limit permittedwithin the Schedule I exemptions.There are no executive departure packages as a result ofthese restructure proposals.