Agenda item

Report of the Strategic Director of Finance and Customer Services

Recommendations:-

1.    That Cabinet agrees that Rotherham MBC remain as a Founder Member of YPO, and in doing so agrees to underwrite the loan through entering into the Supplemental Agreement.

2.    That Cabinet delegates authority to the Strategic Director of Finance and Customer Services to approve and sign the Supplemental Agreement set out at Appendix 4.

Consideration was given to a report which detailed a potential investment opportunity in respect of the Yorkshire Purchasing Organisation, of which Rotherham MBC was one of thirteen members.

It was reported that the Yorkshire Purchasing Organisation (YPO) had agreed to purchase Findel Education Ltd., subject to Competition and Markets Authority approval. Members noted that the YPO would fund the acquisition via a loan provided by Wakefield Council, underwritten by the thirteen local government member authorities.  As one of thirteen local government member authorities who wholly own YPO (a Founder Member), the Cabinet was asked to determine whether to enter into a Supplemental Agreement which underwrote, alongside other Founder Members, the loan for the acquisition and in doing so also secure its status as a Founder Member with preferential dividend returns. It was reported that the Supplemental Agreement safeguarded the position of the Founder Members by effectively amending the Management Agreement in that any Authority serving notice to leave YPO during the ten year loan period would accept a contingent liability for an equal share of the loan outstanding at that time to be paid if YPO was later wound up and assets are insufficient to cover the liability.  In return, the Supplemental Agreement would ringfence an additional element of the dividends to be paid to Founder Members annually, over and above the existing dividend, providing that the venture was successful.

It was further reported that the other twelve Founder Member Authorities had formally approved the signing of the Supplemental Agreement and, as such, the decision of the YPO Management Committee to purchase Findel Education Ltd. legally amended the Management Agreement to include all Founder Members in the financial risk of the acquisition.  It was noted that in the event of the Council not wanting to share in underwriting the loan and the benefits from the investment, it could choose to revert to Associate Member status and still receive dividends but at a significantly reduced level.

Resolved:-

1.    That Cabinet agrees that Rotherham MBC remain as a Founder Member of YPO, and in doing so agrees to underwrite the loan through entering into the Supplemental Agreement.

2.    That Cabinet delegates authority to the Strategic Director of Finance and Customer Services to approve and sign the Supplemental Agreement set out at Appendix 4.