Clause
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UKGI responses to POL Draft
21 February 2019
Shareholder Relationship Framework Document
High Level Issues List
‘ost Office Com
(6 February 2019)
The Framework Document is a public document that will
be available via the gov.uk website. UKGI have advised
that it will not be a legally binding document, and that its
purpose is to summarise the governance framework
through which BEIS and UKGI on its behalf, have
oversight over Post Office. Therefore our approach has
been to ensure that its contents go no further than
replicating information that is already publicly available.
UKGI Responses (6 March 2019)
UKGI/BEIS do envisage that the Framework Document is
to be a public document and will not be legally binding
although we would expect POL to observe the
relationship set out in the Framework Document. The
purpose of the document is to outline the ways in which
BEIS/UKGI/POL will work together and will outline in
greater detail how the relationship between the parties
operates and how the oversight mechanics work. It will
therefore need to contain information that is not currently
in publicly available documents e.g. the provisions on
information sharing.
The initial draft of the Framework Document shows Post
Office Limited as the contracting entity. Subject to
timing, Post Office would prefer that the Document
recorded the post LEO structure, however UKGI has
flagged that if there is to be a material delay, then on an
interim basis a Framework Document will be required
for POL. Should the Framework Document switch to
Holdco, then a number of these provisions will ned to be
amended to reflect the difference between POL and
Holdco.
UKGI agrees with this approach. The Framework
Document is currently drafted with Post Office Limited as
the contracting entity, however, with a view to making a
future global change to apply to Holdco, should that fit in
with the timing of LEO.
ACTION: It would be very helpful if POL let us know
whether there are any provisions that would need to be
revised significantly if Holdco is the contracting entity so
that UKGI can consider/ensure revisions can be
approved with BEIS/HMT officials within a reasonable
timeframe.
Item = Topic
1. Nature of
Framework
Document
2. Post Office
contracting
entity
3. Signing parties
As anon-binding document it is immaterial whether the
document is ‘signed’, however UKGI would prefer that
the document is signed by POL/Holdco. The final
version will need to be approved by the POL/Holdco
Board.
UKGI would like the document to be signed by
POL/Holdco (as appropriate) and understand that it will
need to be approved by the POL/Holdco Board.
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UKGI responses to POL Draft
21 February 2019
Item Clause Post Office Comments (6 February 2019) UKGI Responses (6 March 2019)
4. Secretary of The Articles and other public documents anticipate a UKGI is not currently proposing to provide POL with a list
State approval number of issues which require SoS approval. It would of matters that require personal approval by the SoS,
be helpful to clarify across all documents what actually either in respect of the special shareholder consent
requires his/her personal approval, as opposed to what I matters in the AoA or the couple of instances in the
can be approved by BEIS/UKGI officials. Funding Agreement where SoS approval is required e.g.
remedy numbers of branches falling below 11,000. Are
there any other instances of SoS consent that POL are
referring to?
Generally speaking how SoS approval provided is an
internal matter and UKGI/BEIS officials will have to liaise
on each consent matter to determine whether SoS
approval is required or whether consent can be provided
at a working level.
5. to I Replication of Anumber of provisions from the Articles of Association, I We agree that where an obligations flows directly from
terms the Postal Services Act, the Companies Act, the the AoA, the Postal Services Act, the Companies Act, the
Entrustment letter and the Funding Agreement have Entrustment letter and Funding Agreement these should
been outlined or replicated in the Framework be quoted accurately and we will review your changes
Appendix I Document. We have sought to ensure that these are with this in mind. UKGI notes that as the Holdco and POL
2) quoted accurately such that the Framework Document Articles of Association are currently being drafted, the
does not inadvertently create new/different obligations. Framework Document will require amendments to reflect
these changes and will work these in as we progress
agreement on the AoAs.
As explained above in our response to item 1, the
Framework Agreement will need to contain more
information on certain arrangements than currently
outlined in the suite of publicly available documents.
6. Social Purpose I 2.1 Language describing POL's social purpose was agreed I UKGI agrees with the use of this language.
with BEIS, unions and others in 2013/14- the
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UKGI responses to POL Draft
21 February 2019
Item Clause Post Office Comments (6 February 2019) UKGI Responses (6 March 2019)
text is below.in 2013 (see Appendix). We would
prefer to use that language in a public document
a. Post Office 52 The CEO of POL is the Accounting Officer and therefore I HMT have informed BEIS that technically it is incorrect for
accounting has responsibilities under Chapter 3 of ‘Managing the Perm Sec to designate the CEO of POL as an
officer Public Money''. Broadly, these responsibilities are “Accounting Officer” (AO) because as a public
similar to those one would normally expect of a CEO. i
Following the implementation of LEO, we anticipate corporation (PC) money flows to POL through a BEIS
these responsibilities would attach to the Group CEO. grant rather than directly from parliament. However, the
Perm Sec should still delegate (in writing) similar
accounting functions to the CEO so that the principles of
HMT's Managing Public Money (MPM) flow to POL in its
use of grant funds and public money generally. HMT calls
this position an “Accountable Officer” to distinguish it from
AOs. However, in practice accounting duties are almost
identical since they are based on MPM. The language in
POL's Framework Doc will reflect this, as will the formal
letter from the Perm Sec to the CEO delegating those
accounting duties.?
8. Reporting and 5.4, 6.6 Post Office is already required to prepare and provide The strong preference of BEIS and UKGI is for these
reviews and 11 various reports pursuant to the Funding Agreement, the I provisions on reporting, reviews and information sharing
Postal Services Act, etc. These include: to remain. We understand POL's concern with the
potential for FOIA requests, however, there are
* Annual report (clause 7.1) exemptions to disclosure of commercially sensitive
* https://assets. publishing. service. gov. uk/government/uploads/system/uploads/attachment_data/file/742189/Managing_Public_ Money _MPM__with_annexes_2018.pdf
? In case it is helpful for POL to understand the distinction between Accounting Officer and Accountable Officer we have set out some further detail. An Accounting Office is only required for central
government departments and their ALBs which receive money directly from parliament through the Central Government Main Supply Estimate (‘the Estimate’ — see it here
https:/Awww. gov. uk/government/publications/main-supply-estimates-2018-t0-2019). Since POL is a PC receiving over 50% of its income from payment for services and market participation, it sits
outside the Central Government Estimate system so its CEO's duties to account for public funds, including BEIS grant money, must be formally delegated by the Principal Accounting Officer (the
Perm Sec) to the CEO by letter. HMT and BEIS also require this to be reflected in the Framework Document.
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Item
Clause
Post Office Comments (6 February 2019)
e Annual report on the network of Post Offices
(clause 7.2)
* Quarterly? reporting on (i) performance in the
previous quarter; (ii) expected drawdown of the
SGEI payments; and (iii) update on progress
under approved business cases.
We have sought to replicate these provisions exactly in
the Framework Document and then to include a generic
statement that UKGI/BEIS can make reasonable
requests for other information (clause [11]). We are
keen to avoid a non-binding public document stipulating
the reporting that POL must provide.
For clarity, the specific ‘requirements’ that we have
struck out and replaced with a general obligation are:
(a) At least two review sessions each year between
the Policy Sponsor, Policy Champion and Post
Office (clause 5.3).
(b) I Ageneral obligation to provide the Shareholder's
Representative “relevant information on request
including on but not limited to strategic plans,
financial forecasts and budgets, financial
performance, achievements against targets,
capital expenditure and investment decisions,
board appointments and remuneration, branch
network information and reports on key corporate
risk”. (clause 5.5)
(c) Atleast one annual review of the Board,
committees and directors by the Chair*, and one
annual appraisal of the Chair and a Board
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UKGI responses to POL Draft
21 February 2019
UKGI Responses (6 March 2019)
information that can be drawn upon in response to these
requests, and UKGI is very capable of assisting POL in
responding to such requests.
ACTION: Perhaps the parties can discuss what practical
steps can be taken to mitigate some of the concerns
about POL's view that this will increased their FOIA risk?
° The original draft Framework Agreement specified monthly reporting on these.
4 These requirements should be driven by a general obligation to comply with relevant corporate governance requirements (see clause [ ], although those requirements have still not been specified
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Ite Topi
Clause
Post Office Comments (6 February 2019)
(4)
(e)
effectiveness review by the Senior Independent
Director.(clause 6.6)
Monthly reporting on Post Office's performance
against annual budgets and targets as set out in
the strategic plan.
Quarterly reporting on Post Office's: (a) draw
down on government funding; and (b) progress
on delivery against its planned investments as
provided for in the funding agreement.
Reports on a two-monthly basis on the
performance of the branch network to enable
UKGI to assess compliance against the
objectives set out in the funding agreement and
entrustment letter relating to the branch network
and the provision of SGEI across that network.
Quarterly report on any active litigation and any
threatened or reasonably anticipated litigation.
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UKGI Responses (6 March 2019)
9. Board
Responsibilities
5.6, 5.7
The Board is expected to act in accordance with:
Companies Act
the Articles of Association
the Board Terms of Reference (as set out in the
Appendix)>
Code of Conduct for Board Members of Public
Bodies, and
MPM (Chapter 4)
Framework Agreements do normally contain a
description about an asset's Board responsibilities.
However, if POL's preference is not to annex the Terms
of Reference we can accept and will remove this
reference accordingly.
° The current Terms of Reference date back to 2013 and have not been materially reviewed since then. We are currently reviewing these to ensure they are up to date. Any changes will require
Board approval.
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Item ‘opi
Clause
Post Office Comments (6 February 2019)
Board Terms of Reference are largely an internal
document and reflect the scope of the delegated
authority which the Board has given to the Chief
Executive — as opposed to the maters which it reserves
for itself. This is an internal matter which does not
change the accountability of the Board under the
Articles or the Companies Act. To this end we query
whether it is an appropriate matter to include in the
Framework Agreement.
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UKGI responses to POL Draft
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UKGI Responses (6 March 2019)
sustainability
10. Corporate 8 Post Office is expected to ‘have regard to’ certain UKGI has provided a list of the corporate governance
Governance corporate governance standards which are to be set out I standards it is proposing to set out in Appendix 3 for
in the Appendix. UKGI is requested to provide details of I POL's review. The list has been drawn up in collaboration
these as soon as possible. with HMT (as owners of the guidance and ultimate
arbitrators on what applies to public corporations).
11. Restriction on 9.4 Currently the Articles impose limits on POL's ability to This point has been addressed in the newly drafted
external borrow above £50m subject to a number of constraints. I Articles of Association and will be reflected in the
borrowing The Framework Document goes further and states that I Framework Document.
POL is not expected to borrow ‘externally’ and/or
requires Post Office to obtain BEIS' consent prior to
borrowing externally.
These provisions should be consistent with the Articles
and a wider discussion is required as to borrowing
powers and/or the ability to raise external capital by
Holdco/POL and/or other members of the group.
12. Commercial 9.2 The Framework Document sets out a combined Whether this wording is included ties into the discussion
aspiration on the part of BEIS and Post Office for Post
Office to become commercially sustainable in the future.
We have modified the original language here which had
originally specified that aspiration to take effect from
2021.
and decision on whether to have a dividend policy and
whether it should be referenced in the Framework
Document.
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Item Clause Post Office Comments (6 February 2019) UKGI Responses (6 March 2019)
13. Return on 9.3, 9.4 The Framework Document sets out BEIS’ expectation . We understand that the questions of whether there
Capital and that Post Office will pay BEIS a dividend after 31 March I should be a dividend policy is currently being discussed
Dividends 2021 when the funding agreement comes to an end. between POL and UKGI (via Tom Cooper). If a new
We have modified this language and have removed dividend policy is agreed then the questions become
reference to a time frame. whether this policy should be published. UKGI's current
preference is for this to be included in the Framework
Document, in accordance with Managing Public Money
and the expectations of BEIS/HMT.
Access to There is a general obligation on POL to comply with Noted. Alongside this general obligation the BEIS/UKGI
Information reasonable requests for information. view is that it is helpful to the parties to agree in the
Framework Document what categories of information will
be shared hence the inclusions of specific reporting
provisions i.e. those categories of information outlined
above (a)-(g) at item 8 above.
Confidentiality
We have enhanced the obligations on BEIS and UKGI
to keep Post Office information confidential, however as
the Framework Agreement is not binding, then this
provision has no legal authority unless this provision is
expressed to be binding, however this ties to earlier
discussions on the duties of the Shareholder
Representative as a director of POL/Holdco.
There are specific provisions to protocols to be put in
place regarding privileged information and FOIA.
UKGI to consider further whether POL's specific
amendments in Clause 12 — e.g. cannot accept POL's
inserted 12.1(iii) that any information we receive is not
used without POL's prior written consent.
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UKGI responses to POL Draft
21 February 2019
Appendix — Agreed ‘Social Purpose’ language.
The Post Office is unique: a commercial business set apart by its public purpose. We believe in the importance of connecting communities and enhancing
the powerful role they play in all our lives. We will stay true to this commitment by meeting customer needs through our unrivalled local presence across the
UK.
This statement is underpinned by a set of principles and pledges.
To deliver our purpose we will run our organisation by following four principles:
e Keep customers at the heart of everything we do
e Build relationships based on trust
e Treat everybody with fairness and honesty
e Make a positive social and economic contribution to all the communities in which we work
As an organisation we pledge to:
¢ Maintain ethical attitudes in our behaviours
e Invest in the organisation to secure the business for the future
e Listen with care to the views of customers, colleagues and others with an interest in the Post Office, and support their development
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