National Housing Federation: Merger Code

The NHF’s merger code; ‘Mergers, Group Structures and Partnerships: A voluntary code for housing associations’, has been developed in response to comments from Julian Ashby, Chair of the Homes and Communities Agency (HCA)’s regulatory committee, and in the context of a social housing sector in which an increase in merger activity is expected in response to current Central Government housing policy. In particular the 1% rent reduction will put increasing pressure on many organisations’ business plans.

The merger code is voluntary; however there is an expectation that as this represents a good practice methodology; associations will comply with the code. Housing Associations are already bound (either implicitly or explicitly) to many of the principles of the code through other codes of practice or legislation. As such the code will for many organisations act simply as a useful summary guidance document, for an approach they were already taking. It seems likely that the regulator may therefore have an interest in any association declining to adopt the code.

Although already informally known as the ‘merger code’ the code in fact covers a range of partnership working; considering the continuum from cost sharing groups and strategic alliance to full amalgamation. We expect most organisations will be familiar with some of these forms; and be looking to do more partnership working in the future. It is therefore relevant to highlight that the principles of the code will apply to all potential partnering activity.

The code has 10 principles; which together form a framework for considering partnering opportunities; some of these will need to be embedded in the ongoing activities of the association, while others will arise on an ad-hoc basis.

The framework set out by the ten principles of the code
The framework set out by the ten principles of the code

 

Implications for organisations receiving partnership proposals:

The whole Board are expected to consider any partnership working proposals. A decision on whether or not to move forward should be made in light of the best interests of the organisation; taking into account organisational values and objectives. The reason a decision has been made should be documented showing the factors considered. A presumption that remaining independent is best is not acceptable, and offers should be considered on a case by case basis.

Where an organisation is presented with a partnership opportunity they may seek other proposals for review.

It is expected that the Board will have the right skills to evaluate opportunities. Where they do not they should consider the use of co-optees and independent advice.

Implications for organisations making partnership proposals:

The code sets out how a proposal should be made; it is expected that this will be in writing to the whole board, and with a sufficient level of detail to allow evaluation. Therefore organisations looking to partner need to have done sufficient research in advance to make the case for a partnership.

The offer needs to be transparent and in writing. It is expected that the whole Board will make a decision and that an individual Executive or Board member will not act in a way that will prevent full and fair consideration of any offer (either in support or acting against a proposal)

It is expected that the offer you make will be considered in detail; and that if it is rejected you will be provided in writing with the reasons why. When making your offer it is worth considering how it can be aligned to the interests, values and objectives of the target organisation, to improve its chance of success.