Health and Social Care Act: Implications for Foundation Trust Governance and Constitutional Arrangements

It made it!

On 27 March 2012 the controversial Health and Social Care Bill received Royal Assent and became the Health and Social Care Act 2012. The provisions remain to be brought into force by commencement orders (except for a limited few which are not relevant to this briefing), but we now have clarity on the implications for FT Governance and Constitutional arrangements.

We have set out below what the key reforms are, in relation to FT governance and constitutional matters, and the considerations FTs will need to give to their governance documents with the focus of this on the Constitution.

Legislative position

The Act amends the NHS Act 2006 and, in particular, Schedule 7 of the NHS Act 2006 which will affect the provisions which must be contained in all FT Constitutions.

Representative Membership

The Act extends the Director’s duty to ensure that the FT takes steps to secure that, taken as a whole, the actual membership of the Public Constituency and (if there is one) of the Patients’ Constituency is representative of those eligible for membership. The Act confirms that in deciding which areas are to be covered by the Public Constituency, or in deciding whether there is to be a Patients’ Constituency, the FT must have regard to the need for those eligible for such membership to be representative of those to whom the FT provides services.

Members

The Act requires FTs to hold annual meetings of the FT’s membership (the “Annual Members Meeting”) in addition to public general meetings of the Council of Governors. Both the Annual Members Meeting and general meetings of the Council of Governors must be open to members of the public.

The Act requires the Directors to present the FT’s accounts, Auditor’s report and Annual Report to the Members at the Annual Members Meeting.

Members will have a new power to vote on any constitutional amendments affecting the powers or duties of the Council of Governors, or otherwise with respect to the role(s) that the Council of Governors has been granted in the Constitution. No amendment will be permitted unless more than 50% of the Members present and voting at a Members’ meeting approve the amendment(s) in question.

Board/Council of Governors

All ‘Boards of Governors’ will be known as ‘Councils of Governors’ to distinguish between the ‘Board of Directors’ and the ‘Council of Governors’ of an FT. FTs will still be able to refer to the ’council of governors’ by alternative names in their Constitutions provided the Constitution confirms that whatever the body is known as, it is the ‘council of governors’ referred to in the 2006 Act.

Composition of the Council of Governors

The Act removes the existing requirement for the Council of Governors to include a member appointed by a Primary Care Trust which reflects the abolition of PCTs in April 2013; there is no requirement for a commissioner-side governor to be appointed in place of PCT Governors.

Governors: Duties and Powers

The Act transfers a number of governance/quasi - regulatory responsibilities from Monitor to the Council of Governors. FTs will be required to take steps to ensure that all Governors are equipped with the skills and knowledge they require to perform their roles/responsibilities.

The Act empowers the Governors to require Directors to attend a public meeting for the purposes of obtaining information about the performance of the FT’s functions or the Directors’ performance of their duties. Governors are also empowered to vote on issues concerning the FT’s/Directors’ performance, and a corresponding duty is imposed on Directors to publish such information in the FT’s Annual Report. Governors are also given powers to approve amendments to the Constitution, ‘significant transactions’, mergers, acquisitions and separations.

Directors

Director’s positions are changed little by the Act, but Directors will be under an explicit duty (individual and collectively) to act in such a way as to promote the success of the FT so as to maximise the benefits for Members of the FT as a whole and for the public. Directors will also have a range of new codified duties imposed on them under the Act.

The Act requires that all meetings of the Board of Directors are to be held in public, though members of the public and press may be excluded from meetings for special reasons.

The Act confirms that before holding a meeting of the Board of Directors, the Directors must send a copy of the agenda of the meeting to the Council of Governors. Moreover, as soon as practicable after holding a meeting, the Board of Directors must send a copy of the minutes of the meeting to the Council of Governors.

Other Reforms

A range of administrative reforms are also included in the Act regarding the Annual Report, Accounts, Forward Plans, Information Sharing, Conflicts of Interest etc which will require amendments to be made to FT constitutions.

What this means for your FT Constitution

The reforms mean that all FTs and aspirant Trusts will need to revisit their Constitutions and to begin making preparations to revise these to ensure that they are consistent with the Act. We recommend that FTs consider:

• representative membership drafting;
• Members' meetings;
• the supply of documents to Members;
• duties and power of the Council of Governors;
• the PCT Governor;
• duties of Directors; and
• the role of administrative provisions referred to in paragraph 7 above.

When amending the Constitution there will of course be knock on effects for the FT's:

• Standing Orders for Governors and Directors;
• Standing Financial Instructions;
• Scheme of Reservation and Delegation of Powers; and
• Codes of Conduct for Governors and for Directors.

Future amendments to the Constitution

Under the Act FTs will have a new right to amend their Constitutions without seeking Monitor’s approval. However, the responsibility for approving changes to an FT’s Constitution will transfer from Monitor to the Council of Governors and the Board of Directors subject to more than half of all Governors and Directors agreeing to the amendment(s) in question.

FTs will be required to inform Monitor of any amendments they decide to make to their Constitutions, but Monitor will not assess whether these are consistent with the NHS Act 2006; instead, the Directors must be satisfied that this is the case.

How can we help?

We have looked beyond the Act to the post-reform landscape, which is indeed a changing one, where FTs not only want to exploit their commercial freedoms, but are equally aware of their need to protect and develop brand reputation whilst managing risk and developing business potential.

As a result of the reforms contained in the Act, FTs and aspirant Trusts will need to review and revise their Constitution and wider governance documents to ensure that these comply with the evolving regulatory framework.

Our commercial team would be happy to assist you with understanding the Act reforms and the implications it will have for your organisation. We can also assist you with reviewing and revising your Constitution and wider governance documents. Our advice in this area draws on our extensive experience in advising FTs on these matters.

We can also provide training and development support for Boards of Directors and Councils of Governors to help prepare for the new regulatory, compliance and governance landscapes.