3.23 Public sector stakeholders and the relevant Monitoring Officer and/or Chief Executive, or the Accounting Officer need to be satisfied with the consequences flowing from the fact it will be setting up a JV that may have a separate legal capacity and have to be allowed by law to make its own decisions, employ people, and enter into contracts etc. Consideration should be given to any public accountability, ministerial responsibilities and audit requirements.
3.24 The level and manner of public sector control over the JV will have significant impact on its classification and accounting treatment (see Chapter 5) and may have State Aid implications (see 3.35 below).
3.25 Other key issues will include the degree and nature of delegations, governance and the roles and responsibilities of the partners (as set out in Chapters 8 and 10).
3.26 It is important that the JV management is given real responsibility (see also Chapter 10). If too many matters are labelled as "reserved matters" for the shareholders to take away and decide outside the forum of the Board, the management may feel disenfranchised and become frustrated.
3.27 The governance arrangements will be considered in the assessment of the classification treatment of the entity for the national accounts (see also Chapter 5). There may also be a risk that the public sector body puts itself in the position of a shadow director.33
3.28 Unless there is an overriding policy reason for intervention, the business of managing the JV should be done by the management board of the JV itself and not taken outside it. If there is insufficient policy stability or excessive public sector intervention, the JV may not be a success.
3.29 When considering the business of the JV a balance must be struck between granting a functionally important role to the JV whilst ensuring that a public sector body does not delegate activities other than those it is permitted to by Statute (e.g. pursuant to an order under the Deregulation and Contracting Out Act 1994).
3.30 It is also important that the staff of the public sector body engaged in negotiating the JV have the necessary skills, or access to those skills through advisers, and have clear responsibilities and a well-thought through incentive structure. Potential conflicts of interest will also need to be considered and managed (see also Chapter 3).
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33 A shadow director is a person or any legal entity deemed to be fulfilling the role of a director under the Companies Act 2006 and subject to some of the same regulatory controls and accountability as a "proper" director.