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Sanctuary rejects merger code

England’s largest housing association will not sign up to a voluntary merger code for the sector, Inside Housing can reveal.

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Sanctuary Group has announced it will not sign up to the code, which introduces a set of rules to govern merger approaches.

The 100,000-home landlord said it believed the code, developed by the National Housing Federation (NHF), was “unnecessarily onerous” and “does not add anything” to existing governance.

It said the landlord “made its views clear” during the consultation, but these were “not reflected” in the final document.

In November, the NHF unveiled its 10-point merger code, which was devised to encourage good practice, promote transparency and dispel perceptions of inefficiency. 

Regulator the Homes and Communities Agency (HCA) has urged landlords to consider the code but will not enforce it.

David Bennett, chief executive of Sanctuary Group, told Inside Housing: “Sanctuary’s board has decided not to adopt the NHF’s new Voluntary Code for Mergers.

“Sanctuary was involved in the consultation and made our views clear. These were not reflected in the final document.

“Having conducted 27 mergers and acquisitions to date, Sanctuary understands the need for an approach that is both robust and flexible.

“We agree with some of the observations that the code is unnecessarily onerous, does not take into account the different circumstances behind every merger and, certainly in the case of Sanctuary, does not add anything to our existing governance arrangements relating to such matters.”

Last week, a number of mid-sized associations said they would not sign up to the code over concerns it favours predatory takeovers and is burdensome – because it compels associations to demonstrate they have considered and responded to every merger proposal their organisation receives.

And Tony Stacey, chief executive of South Yorkshire Housing Association and former chair of Placeshapers, added in a blog that it would have “sparked howls of protest” if introduced by the HCA.

UPDATE: At 2.30pm on 2.2.2016

Stephen Bull, head of governance at the NHF, said: “This is a voluntary code for our members. It sets out clear principles for boards and the executive to consider when they explore the questions of merger, group structure or partnership opportunities.”

The NHF code’s 10 principles

1. The role of the board is to act in the best interests of the organisation and its beneficiaries. There should be no presumption that a merged entity is in the best interests of the organisation but the board will give the proposal serious consideration.

2. Boards should review an organisation’s purpose and value statement regularly to consider if the intent is clear and specific enough to allow the board to determine how to continue to fulfil its objects.

3. Where merger or partnership opportunities emerge the whole board should be informed promptly. The parties should agree a process and timeline for the consensual development of first-stage proposals in order that the respective boards may properly evaluate the opportunity and make an informed and timely decision.

4. Decisions around mergers, group structures and partnership proposals must be presented to, and decided upon, by the board. In considering any proposal, a board should have access to sufficient written information to reach an informed in principle decision to explore or reject merger, group structure or partnership. Information provided at the first stage should include written proposals with enough material to allow the board to consider the over-arching suggested intent of a combined business or partnership and the strategic and practical implications for their respective organisations.

5. Boards should ensure they have, or have access to, specific skills and experience necessary to objectively evaluate the merits or otherwise of mergers or partnership proposals.

6. No board member or members of the executive should behave in a way which could frustrate due consideration of the first-stage proposal by the whole board. This includes failure to present or discuss proposals with the board, dismissal of an offer without due consideration, or withholding information that is integral to a decision.

7. A board’s decision on a first-stage proposal should be documented and communicated.

8. Once a first-stage proposal has been agreed by the board, a process and timetable for the next step should be agreed in writing by both parties.

9. Following approval of the first-stage proposal and intent to proceed, an outline business case should be prepared which will include disclosure of financial and non-financial undertakings and target efficiencies undertakings to be realised as part of the merger proposal.

10. Boards which adopt the voluntary code will declare this each year in their financial statements. Boards will seek to keep a record of any activity under the code including any proposals reviewed or submitted, along with the outcome of these.

Source: National Housing Federation

 


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