National Smartcard Project

1. National Smartcard Project Work Package 8 – Corporate Structures Report

2. Corporate Structures Report • Format of report: • Executive summary • Introduction and Scope of report • Overview of Corporate Structures in the UK • Separate parts reviewing Key Features of various Corporate Structures • Financing • Overview of PFI • Regulatory provisions of general application • Overview of documentation • Capacity

3. Executive Summary The Executive Summary outlines: • What is covered in the introduction to this report • The scope of this report • The key points covered in each section of this report and any conclusions reached

4. Introduction The Introduction explains: • Purposes of report • Parameters of report • Context in which to be read • Summary of key legislation and regulation reviewed Please note that the report should be read in conjunction with the Introductory Report

5. Scope of report The Scope of this Report sets out: • The focus of this Report • namely the options for the corporate structures which may be adopted to procure and deliver Smartcard Schemes • Other matters which are considered • including: funding options, competition law issues, Local Authority's statutory ability to participate in an incorporated special purpose vehicle

6. Overview of Corporate Structures in the UK • General introduction to various entities • A company • A limited liability partnership (or LLP) • A partnership • A joint venture • A non-profit distributing organisation (or NPDO)

7. Key Features of a UK Incorporated Company • Different types of company • company limited by shares • company limited by guarantee • unlimited company • Public or private? • Principal legislation • Formation • Registration and ongoing obligations to file documents

8. Key Features of a UK Incorporated Company (cont.) • Constitutional documents • Memorandum or association • Articles of association • Shareholders agreement • Shares and shareholders • Capital structure • Changes in share capital • Share premium • Transferability of shares • Liability of shareholders

9. Key Features of a UK Incorporated Company (cont.) • Directors and Officers • Appointment and removal • Rights and duties • Who can be a director • Company secretary • Meetings of the company • AGMs • Other shareholders’ meetings • Electronic communications • Meetings of directors

10. Key Features of a UK Incorporated Company (cont.) • Dividends • Debt instruments • Insolvency • Corporate governance • The Combined Code • Principles of good practice for companies including risk management and internal controls • Nature of recommendations of Combined Code • Companies conducting certain types of business • Additional regulations in certain industries

11. Key Features of a UK Incorporated Company (cont.) • Companies limited by guarantee • Key characteristics • No Share Capital • Tend to be used for non-profit making organisations

12. Key Features of a Partnership • Introduction to partnership law in the UK • Some advantages of a partnership set up • Some disadvantages of a partnership set up

13. Key Features of a Limited Partnership • What is a limited partnership? • Main characteristics of a limited partnership • Some disadvantages of a limited partnership

14. Key Features of a Limited Liability Partnership • What is a limited liability partnership (LLP)? • Main legislation • Characteristics of an LLP • Similarities to a company • Similarities to a partnership • Other key characteristics • Formation • Incorporation and registration

15. Key Features of a Limited Liability Partnership (cont.) • Designated members • What are they? • What are their responsibilities? • Ongoing administration • Structure • Need for comprehensive agreement between the members • Default provisions • Winding up an LLP • Some advantages of an LLP • Some disadvantages of an LLP

16. Key Features of a Joint Venture • What is a joint venture (JV)? • No single area of law applies • Different forms of JV • Contractual JV • Partnership JV (unincorporated) • Limited partnership JV (unincorporated) • Limited liability partnership JV (incorporated) • Limited (or unlimited) liability company JV (incorporated) • Other sorts of JV

17. Key Features of a Joint Venture (cont.) • Which form of JV? • Factors to consider • Advantages of forming a JV • Some of the benefits • Disadvantages of forming a JV • Some of the most common pitfalls • Problems specific to Local Authorities

18. Key Features of a Non-Profit Distributing Organisation (NPDO) • Constitution of an NPDO • Proposed changes to the law • Community interest companies

19. Financing • Partnerships • Companies • PFI • Strategic service partnerships • Further types of financing • Loan stock • Non-cash transfers • Loans from third parties • Bank overdrafts • Grants

20. Financing (cont.) • Key issues regarding financing options • Guarantees • Comfort letters • Solvency

21. Overview of PFI • Background • What is it? • Funding • Equity/debt split • Independent funds • Capital markets • Finance leasing • Application of EU procurement regime

22. Overview of PFI (cont.) • Key documents • Other important points in relation to PFI and Local Authorities • Concession arrangements

23. Regulatory provisions of general application • Competition law • Anti-competitive agreements • Abuse of a dominant position • Merger control • EU public procurement regime • State aid • Types of aid • Prohibitions • EU investigations • Block exemptions • Other regulatory provisions

24. Overview of documentation • Partnership • Limited liability partnership • Company/incorporated joint venture • Shareholders agreement • Memorandum of association • Articles of association • Unincorporated joint venture arrangement • Generally

25. Capacity • Local Authorities • Generally • S2 Local Government Act 2000 • Different classifications of company • Controlled company • Arms’ length controlled company • Local Authority influenced company • Private sector influenced company • Minority interest (authorised) company • PFI Contracts • S1 Local Government (Contracts) Act 1997 – “provision contracts” and related contracts

26. Capacity (cont.) • Local Authorities (cont.) • Other contracts for services • System of certification • New prudential powers • Local Government Act 2003 – the new capital finance system • Companies • LLPs • Partnerships • NPDOs