Agenda Item 5 Cmmissiners Meeting Mem N 11/15 1 Octber 2015 Frest Hlidays Gvernance 1. Purpse T update Cmmissiners n the fllwing matters: a) The creatin f a Crss Brder, Executive level, Gvernance Grup t deal with Frest Hlidays issues. b) Distributin f a new Signpsting Dcument prepared by Eversheds detailing the main crprate structure f Frest Hlidays, the current sharehlding and the mechanisms. c) Statement f Equity value in each Cuntry and prpsal fr the creatin f a Deed f Trust between the Frestry Cmmissiners, FE(E), FE(S) and NRW t ensure clear prcess during Devlutin including an internal reallcatin f the FC investment in Frest Hlidays d) Appintment f new Frestry Cmmissin nminated Frest Hlidays Directr. e) Cuntry Updates. 2. Backgrund/Intrductin Frest Hlidays was restructured in September 2012 which resulted in the creatin f tw new businesses. These are Frest Hlidays (FH) LLP and Camping in the Frest (CiTF) LLP. In 2014 Internal Audit reviewed the Gvernance Arrangements fr Frest Hlidays. The summary f their finding is included in Annex 1. 2015 has seen increasing site develpment activity in Wales and Sctland fllwing Planning Challenges in England and a refinement f the Site Develpment mdel by Frest Hlidays. This is taking place in parallel with the further f devlutin f Frestry Matters priritising the need t ensure clarity n hw the Cmmissiners equity interests in Frest Hlidays will be transferred as part f any Devlutin Agreement r indeed the creatin f a new Public Frest Estate Management Organisatin in England. 1 Mem 11/15 Frest Hlidays Gvernance 15/12/2015
Due t the cmprehensive legal dcumentatin package that surrunds Frest Hlidays the executive team have been wrking n a Signpsting Dcument prepared by Eversheds f the key Crprate Structure, supprting Dcuments and current Sharehlding. 3. Details a) Gvernance Grup This has nw been cnstituted t c-rdinate crss brder activity. This has met n tw ccasins and is respnsible fr the majrity f cntent in this paper. The cre Grup cnsists f Wilma Harper, Ian Gambles, Simn Hdgsn, Simn Hdge and Mark Street prviding technical supprt. NRW t be invited as and when required. b) Signpsting Dcument This dcument is included with the paper at Annex 2. It sets ut a summary f the Sharehlding, mechanisms fr the sale f thse shares (Drag and Tag) and the main Crprate Structure. It is prvided fr infrmatin and t act as a paper based Memry Bank as thse invlved with the 2012 agreements leave the Frestry Cmmissin. c) Inter Cuntry Equity Values and Deed f Trust (i) Internal allcatin f FC s investment in FH LLP England, Sctland and Wales (NRW) agreed t apprtin the verall FC stake in FH in accrdance with the site valuatins fr each cuntry, as determined by independent Chartered Surveyrs. The internal allcatin is updated each year fllwing receipt f the annual independent valuatin reprt frm the Chartered Surveyrs and the resulting investment values are recrded in the FE Sctland, FE England and NRW annual accunts. The table belw demnstrates the values and internal FC investment percentages n a cuntry basis since September 2012 when the new arrangements came int effect. 20 Sept 2012 31 Mar 2013 31 Mar 2014 31 Mar 2015 % % % % England 4,096,000 83% 4,796,000 83% 6,140,000 86% 6,240,000 87% Sctland 600,000 12% 680,000 12% 680,000 10% 680,000 10% Wales 260,000 5% 260,000 5% 260,000 4% 220,000 3% Ttal 4,956,000 100% 5,736,000 100% 7,080,000 100% 7,140,000 100% 2 Mem 11/15 Frest Hlidays Gvernance 15/12/2015
The main reasn fr the percentage and valuatin mvements is due t the creatin f new sites and grwth f the business, predminantly in England since September 2012. It shuld be nted that the verall FC equity share in Frest Hlidays may fluctuate frm the riginal 20% figure at the time f the 2012 subscriptin due t the issuing f new shares apprved by the Frest Hlidays Bard. This des nt autmatically affect the verall value f the Cmmissiner s hlding (nte that the LDC equity % als reduces) and des nt affect vting rights which remain at 20%. Reference t the Signpsting Dcument para 2.2 gives further explanatin. Shuld the cmpany be wund up the distributin f the net value is set in the Articles f the Cmpany as per para 4 in the Signpsting Dcument. This prtects the cre equity value (assuming the net assets are sufficient) and prvides fr a clear hierarchy f subsequent sharing f prceeds. The Frestry Cmmissin has c-invested in site develpment since 2012. This was a cnditin f the Sharehlder and Investment Agreement in rder fr the Frestry Cmmissin t maintain its sharehlding and the cnditins required have been met. The table belw sets ut the dates f investment and the current value shuld Frest Hlidays wish t repay the debt t the FC. (ii) Deed f Trust As well as fllwing up a recmmendatin frm the Internal Audit reprt there is nw a time imperative t agree hw this three cuntry split might be treated during further Devlutin r legislatin t create a new Public Frest Estate Management Organisatin. 3 Mem 11/15 Frest Hlidays Gvernance 15/12/2015
In additin Spending Review targets may create a need fr an individual cuntry t dispse f their share f the Equity in return fr cash. Such an actin wuld require the apprval f the thers as per the Signpsting Dcument para 9.2. It is prpsed that the Executive Gvernance Grup will nw prceed t cmplete an agreement t set ut the apprval prcess, technical mechanism and financial utcmes required t accmmdate these changes and present t the Cmmissiners fr later apprval. The internal reallcatin f the Cre FC Equity hlding has been discussed in principle with FE England s external auditrs (Natinal Audit Office and Ernst and Yung), with n immediate cncerns raised by either audit bdy. In additin it will be necessary t understand the implicatins n the crprate Frest Hlidays dcuments especially the 2012 Framewrk Agreement which may require amendment t becme cuntry specific especially in the Site Apprval prcess. d) Appintment f new Frest Hlidays Directr. Interviews were held n the 18 th September fr the new Directr. There was a very strng and cmpetent field f applicants. The Executive recmmended Mr Peter Nixn as the new Frestry Cmmissin appinted Directr. e) Cuntry Updates (i) England A new internal site selectin and apprval prcess, EMGN4a was tabled at the ENC Meeting n the 16 th September. This imprves n the previus EMGN4 which cvered all nn-frestry develpments sme f which required the cnsent f the English Minister which in the case f Recreatin type develpments in England is nt the case fllwing the Cuntryside Act 1968. The final versin will be agreed via crrespndence. FEE have allcated extra resurce t managing Site Selectin and apprval bth t imprve internal prcedures and supprt Frest Hlidays in the delivery f their investment n the PFE. The relevant extra csts f this will be recvered frm Frest Hlidays as per the framewrk agreement and t supprt Recmmendatin 4 in the Internal Audit Reprt. 4 Mem 11/15 Frest Hlidays Gvernance 15/12/2015
Once the new Site Selectin/EMGN prcess is signed ff by the ENC attentin will be given t a review f the 2012 Framewrk Agreement including the grund rent as per Recmmendatin 1 and 5 in the Internal Audit Reprt. The utcme f this review will be shared with the Gvernance Grup and the Cmmissiners at their next meeting and an update will be prvided t Internal Audit. (ii) Sctland FES are engaging with Scttish Gvernment (SG) in relatin t the future arrangement fr frestry in Sctland. As part f this engagement prcess FES is drafting a briefing paper abut the current and ptential future psitin f the jint venture agreement with Frest Hlidays and Camping in the Frest. At present FES is cnducting a review f varius scenaris and ptins t realise the FES equity share with bth Frest Hlidays and Camping in the Frest. Realising the share wuld simplify arrangements in Sctland, allwing FES t fcus n a gd landlrd/tenant relatinship and release sme resurce at a time f financial pressure n FES. 4. Resurce Implicatins Nil. Each Cuntry is allcating existing resurce. 5. Risk Assessment Nt required. 6. Cmmunicatins Issues It is recmmended a cmbined press release with Frest Hlidays is agreed t cnfirm the new Directrs appintment. 7. Implementatin and Evaluatin Prpsals Nne. 8. Recmmendatin 5 Mem 11/15 Frest Hlidays Gvernance 15/12/2015
That the Cmmissiners nte the fllwing: The Creatin f the Gvernance Grup The Signpsting Dcument including the current Equity split, valuatin and investment recrd. The Cuntry Updates. The appintment f the new Frestry Cmmissin nminated Frest Hlidays Directr That the Cmmissiners Direct the Gvernance Grup t prepare a paper and draft Deed f Trust detailing hw the cre Equity in Frest Hlidays culd be redistributed between the Cuntries the impact f devlutin n the 2012 Framewrk Agreement and what timescales wuld be mst effective. Ian Gambles Directr, Frestry Cmmissin England 23 September 2015 6 Mem 11/15 Frest Hlidays Gvernance 15/12/2015