SGM Questions
from Members and Responses

Draft rules of the Society

In the spirit of a desire to respond to the concerns raised by Members of the Society, the following Rules have been edited by the Governance Committee ahead of the SGM.

New draft Rule 10.3 has been amended to read “It is a Board decision as to whether”.

New draft Rule 14.4 added wording to the rule ‘Or equally one term of 4 years, a break of at least one year and then another two consecutive terms giving a total of twelve years service overall.’

Draft Rule 15.1.8 removed wording ‘Not acting in the best interests of the Society’.

Removed Draft rule 15.4 If the office of a Board member is terminated and leaves a vacancy, the Board may co-opt a Member of the Society to fill said vacancy. Co-opted Board members will hold office until the next annual general meeting but may be eligible for further co-option if further vacancies arise.

New draft Rule 16.10 removed wording ‘co opt further Directors or to’.

New draft Rule 20.11 increased the Quorum for meetings from 20 to 100.

Restored the old Rule 35.2.6 in to the new draft Rule 34.4 “the quorum for a meeting at which a special resolution to amalgamate, transfer engagements to or convert into a company is to be voted upon shall be 500 members present in person, or 50% of the Society’s total membership present in person, whichever is the lower”.

The Governance Committee hope that the above changes demonstrate the Board's willingness to engage in meaningful consultation and that members will feel able to support the Board of HF Holidays in its drive to improve our ability to respond to the challenges we face.

Member questions and responses

Please find below a range of questions received from members since the first notice of the Special General Meeting, which was originally set for 28 March, then moved to the virtual AGM on 5 September, and that took place on 12 December 2020. We have provided a response to the questions:

RESOLUTION 1 - CORPORATE GOVERNANCE

To adopt a revised set of Rules of the Society, substituting the current Rules with the draft new Rules available online at www.hfholidays.co.uk/agm, excluding those Rule changes dealt with in Resolutions 2, 3,4, below. The revised Rules reflect changes required by law or recommended by Cooperatives UK that make a material change to the Rules and Society practice. Please click here to review the precise wording of the Resolution to be voted on.

Question from Jill Stuart (Rules reviewed by the Regulators)

I am pleased that the board are ensuring the rules are up to date and reflect best practice.

It is important that we are prepared to embrace change and move with the times, particularly given the unprecedented challenges facing the holiday industry.

Could the board confirm that all proposals have been reviewed by the regulator, the FCS and Co-operatives UK and are being presented to members with their endorsement and support?

Response: Thank you. It can be a really tortuous business updating the rules of a Society and so many Boards put it into the ‘too hard to do’ box.

However, the Board agreed that, as part of our strategy to ensure HF Holidays was fit for the future, it was essential to take on that challenge. To ensure the changes reflect best practise we worked with CooperativesUK to produce the proposal that is being put before the Members at the SGM.

Any new Rules need to be registered with the Financial Conduct Authority (FCA) before they can come into force. We have therefore asked the FCA to review our proposed changes in advance of the SGM. They have indicated that they are happy with them as presented and, if the Members approve them, they would be content to register them.

The Board is acutely aware that our Members are by their nature ‘conservative’ and therefore cautious about change. That has been one of HF’s strengths over the years however there is a time when any business needs to move forward. The Board believe that, given the present economic climate, it is essential that we embrace these proposed changes if we are to come out of this crisis stronger.

RESOLUTION 2 - FINANCIAL REGULATIONS

Amendments following guidance from the FCA and to support best governance practice, including the provision to set the Interest Rate payable on Share Capital in advance of the period it relates to. Please click here to review the precise wording of the Resolution to be voted on.

Question from Martin Turnerv (Rule 10.3)

Within proposed rule 10.3 what is the point of the sentence " Interest on share capital is a cost of capital and should not be paid out of surplus"?

Response: This reflects the view of our Regulator, the FCA, as to how Interest should be treated in our Accounts. A “cost of capital” should be charged to the Profit and Loss Account in order to determine the profit for a period.

If Interest is ‘paid out of surplus’ it is considered to be a distribution. It is conditional on there being an available surplus in order to be able to make a payment.

Our current practice of voting on Interest at our AGM , retrospectively for the year in question, creates the impression that we are treating it as a distribution.

The guidance from the FCA is that we need to change our current practice hence the proposal to set our interest rates in advance in line with every other deposit taker and Cooperative in the UK.

RESOLUTION 3 - ELECTRONIC ENGAGEMENT WITH MEMBERS

An amendment to allow the Society to comply with the Cooperative and community Benefit Societies Act 2014 in its communications with its Members and permit the use of electronic communications where Members have specifically opted in to receive Society communications electronically. This is also in response to concerns raised by Members about the use of resources and presented as a Member motion by Bob Gomersall at the 2019 AGM. The Resolution will also expand the definition of ‘attendance’ to allow virtual attendance at board meetings and Members meetings. Our experience through this Covid19 period is that this has improved attendance and engagement. Please click here to review the precise wording of the Resolution to be voted on.

Question from John Acton (Electronic voting)

You can vote electronically but there is no requirement that the Board should make this arrangement. Not every member would be able to attend electronically.

There should be the opportunity to vote on matters of importance.

Response: As a result of the Covid-19 pandemic the Board has had to rethink how it best holds general meetings and ensures member participation whilst at the same time ensuring the safety of members and colleagues.

Holding face to face meetings is just not possible right now, however the Board still wishes to ensure that it can hold general meetings and enable members to engage and participate. New legislation, passed to deal with Covid-19 restrictions, provides the Society with the opportunity to hold its general meetings electronically, over-riding existing Rules and despite what previous practice has been. The Board does acknowledge that some members may not have internet access or access to a suitable device, however the majority of our members welcomed the opportunity to attend the virtual AGM held in September 2020 and we saw a large increase in the number of members attending that meeting.

We agree that Members should be able to vote on matters of importance, and also have the opportunity to ask questions and voice concerns. All Members attending the SGM virtually will be able to vote on all of the resolutions.

RESOLUTION 4

Question from Christine Abbott

I have read through the revised rules carefully and also noted the changes that you have made as a result of Member feedback. It is clear to me that very great thought and care have gone into these revisions. I am fully in support of the changes made. In particular, I believe that the rules around the terms of office of Directors, including specifying the maximum number of years that a Director may serve, are entirely appropriate. The new rules are in line with good practice in other sectors, and help to ensure the best balance between continuity of expertise and the need for fresh thinking.

Resolution 4A: BOARD OF DIRECTORS' MAXIMUM SERVICE

To adopt the proposal to limit the period a Director can serve on the Board to a maximum of 12 years. Please click here to review the precise wording of the Resolution to be voted on.

Question from David Eallen, Angela Brassey, & David Gray (Two consecutive terms on the Board)

The present system has served us well and especially as it is a voluntary post it is not a bad idea to stand down and have a break and return refreshed. There is nothing in the new rules to say we have to change our modus operandi. It has been quite common in the past for previous board members to be re-elected. There is no shortage of potential talent as shown by this year's candidates. I would imagine any potential CEO could be put off if he thought he might have the same chairman throughout his tenure.

I do not approve of a Board Member being allowed to serve for two consecutive terms on the Board. The year off is there for many reasons and I feel strongly that it should be adhered to. To restrict a Director to a maximum of 12 years seems somewhat unnecessary, if they are knowledgeable and keen enough to stand for re-election. It is highly desirable to maintain continuity and to have someone who has experience of what has already been tried and tested.

My primary issue is with the changes to the election and terms of office of Directors. It is not acceptable to take away from the Members their democratic right to elect all Directors but the rules propose that that Board may appoint some in some circumstances. The existing rules provide a system that deals with all eventualities, provides the refreshing ‘sabbatical’ every four years and has been proven over a long time (possibly 106 years). It surely is the Members right to decide how many times a Director comes back into service depending on all facts and other issues of capability and need.

Response: The Board have thought long and hard about the best way to balance continuity and experience with refreshing the Board, in order to support the future of HF Holidays. Some of the factors we considered were:

  • Retiring Directors who have served a 4 year term are arguably at their most useful, their knowledge being current and profound
  • The disruption caused by having 3 new Directors join each year and having to learn about a complex business
  • How best to refresh the Board regularly

To balance this, your Board is proposing two concurrent terms and a third term with a gap between (in any order).

Term - All Directors will finish their term, the Rules have made no change to this. Whether Directors can then reapply, will depend on the number of years’ service already given. All future Directors will have the opportunity (if voted for) to serve 3 full terms of 4 years.

Transition - No transition is perfect, but this felt the fairest to both new and existing Directors. In line with Our Values, it was felt that the limits to tenure should apply to the Board that is proposing the change.

Chair of the Board - the Chair is elected annually by the Directors and has no guarantee of being re-elected. However, changing Chair every year (as happened during Jim Forward’s time with us) was extremely disruptive for the Chief Executive and Senior Management Team.

These new Rules will be subject to a set of resolutions to be proposed at the Society’s online SGM on the 12 December, and your Board commends the New Rules to the Membership for approval and adoption.

Resolution 4B: qualification to stand for election to the board

The key proposal is to remove the restriction on a retiring Director from standing in Board elections after their first term of office. This will provide the opportunity for Members to vote for a retiring Director so that, if they are successful, they can serve one further term, thereby allowing HF Holidays to take advantage of the skills and knowledge that the individual will have acquired over their initial term of office.

A retiring Director may have only served for a limited period, for example 1 year if they have filled a casual vacancy. It does therefore feel reasonable for them to be given the opportunity to put themselves forward for election for another term.

This concession would only be available to a Director once in their entire service on the Board. The Rules also provide transitional arrangements for the current Directors to ensure continuity. Please click here to review the precise wording of the Resolution to be voted on.

Question from Angela Brassey (Replacing Board Members)

Any changes in the Constitution require a ‘Special Resolution’ must be approved by shareholders. It is certainly NOT within the powers of the Board to co-opt a new member to replace the one they have removed. The Board should have NO part in their own election or in their own membership.

Response: A two thirds majority at the SGM is of those who are present at the meeting, and not the entire membership. See rule 31.1.

The appointment of a separate Society Secretary, who will act as a returning Officer, will ensure that Directors have no role in elections.

Questions surrounding the SGM

An open letter to HF Members from a group of 18 Members

An open letter to HF Members

As members of HF, collectively for several hundred years, we are writing about the virtual Special General Meeting (SGM) which is due to take place on-line at 2pm on Saturday 12 December and to urge Members to vote against each of the 4 resolutions being tabled at it.

The 4 resolutions contain amendments to our Rules and, in toto, amount to the most significant change to how HF is run since its creation in 1913. We are urging fellow HF members to vote against the resolutions, not because we are against change in principle but, because

a. the proposals have not been subject to prior consultation, have been accompanied by little to no justification and thus are little more than an attempted fait accompli. This is not the HF way of doing things.

b. changes to the rules often have complex implications and hitherto have always been presented at physical AGMs where they can be outlined, explained, debated and challenged. Many members share with us the belief that a virtual on-line SGM is not the right or best way of fulfilling that important scrutiny function. There is no urgency to these resolutions and therefore no reason not to await an opportunity when they can be considered in the usual way.

c. of the resolutions, number 4 concerning the appointment of Directors and which would provide for up to 8 continuous years of service without the current safeguard of a one year firebreak and a maximum of 12 years service in total is the most damaging. Its rationale is spurious — current arrangements have consistently delivered a healthy mix of long experience and new blood — and have stood the test of time for more than a century. At the virtual AGM in September you may have heard our CEO say that y/e 2019 was the fourth consecutive year of steadily improving finances — and the best trend in performance in a generation. So, as the old management dictum goes: "if it ain't broke, don't fix it".

In order to be able to vote at the SGM you'll need to register (by midday on 11 December). You can do that at: https://www.hfholidays.co.uk/membership/sgm. If there is more than one HF member in your household and all wish to participate you'll need to register separately and, on the day, log-in to the event using separate devices. Please do register, attend on-line and vote down this unnecessary raft of resolutions.

Thank you for taking the time to read this open letter.

Yours sincerely,

MEMBERS OF HF
The Abbott Family (4 members), Stephen Booth (former Director), Angela Brassey (VicePresident & former Director), Louise Cottingham, Daphne Forrest (former Director), Peter Forrest, Trevor & Wendy Higgs, Dr Bob Gomersall (Vice-President & former Chairman) & Dr Tricia Gomersall, Dr Sarah Hopkins, Peter Little, Carmel Neville, Emily Reid, Ian Williamson (former Director)

email: HF.SGM.2020@gmail.com

Response: Thank you for your engagement with this process, our responses are as follows:

A). Consultation
The proposals were circulated to members in February this year in anticipation of them being debated at the physical AGM due to be held in March. Of course, Covid intervened, but there was still a lot of input from members that we have responded to.

With the postponed meeting we switched to plan for a Virtual SGM in December and the proposals were circulated again. That has resulted in considerable engagement with the members, which is reflected by the number of questions and answers on this SGM webpage. As a result of the consultation and the issues raised by members, the proposals have been amended and the notice of the meeting re-issued. I think that is already clear that the level of engagement with this SGM is higher that HF has experienced in the past, where it has traditionally been the same group of members who have had the self-confidence to raise issues at a physical meeting. There is no doubt therefore that the utilisation of modern technology and the tools available in a virtual world, has improved the ability, and desire of, the members to engage in the democratic process.

B). Explanation of proposals
The combination of the Notice of the Meeting and the videos on our Q and A webpage does, we believe, make it clear what the impact of the proposals are. Our confidence is based on the fact that so many members have raised questions around the proposals that the information is clearly available. There will be a presentation around each proposal at the SGM. It’s hard to imagine that any previous AGM audience has had as much involvement in Board proposals before they are asked to vote. That really is one of the advantages of utilising electronic communication.

C). Support for an online SGM
It was clear from the September online AGM that members are supportive of adopting the online approach. Over 600 registered and 511 attended, which is probably twice the number of attendees we have ever had. I suspect that there is a possibility that we could exceed that number this time, which would suggest that the membership is adapting to this new world. Our challenge for the future will be to find a way to combine both aspects of a physical and virtual meeting so we can have the best of both worlds.

D). Timing of the SGM
Our rule book does not permit us to hold a Virtual Members meeting or for members to vote online. We can only operate as we plan because, as a result of the Covid regulations, the Government granted a concession to allow businesses to operate in the virtual world. That concession expires at the end of December. If we haven’t changed our Rules by then we won't have the ability to hold members' meetings until we can organise a physical meeting. Given the profile of HF members we suspect it could be 2022 before we will be able to gather in large numbers. We therefore really don't have an alternative but to hold a Virtual meeting before the end of December. If we can’t hold our 2021 AGM in April, there are many implications for the Society, not least of which is that we can’t pay interest to the members on their Share Accounts.

E). Appointment of Directors
Your statement here is incorrect and misleading. The proposal does not ‘provide for up to 8 continuous years’ service’. The proposal does not change the requirement for all Directors to stand down at the end of their designated term of office. Often this is for 4 years but could equally have been for 1, 2 or 3 years. The change that is being proposed is to provide the opportunity for that Director to stand for office in the following election. It is therefore entirely up to the members who they vote for and who subsequently gets elected. If the electorate chooses someone who has previously served on the board that is their prerogative, and democracy in action.

F). Limitation of service
The proposal is to limit service on the board to 12 years. This is in line with both the Corporate and Cooperative Codes of Governance. In fact both recommend nine years but we extended this to reflect the unique history of HF. The reason that external bodies recommend a limit of nine years is that there is clear evidence that, after an extended period of time, a non-executive director loses their ability to bring independent challenge and fresh ideas. This can lead to business underperformance or indeed business failure.

There are more than enough Members prepared to step up to take on the role of Director and there is therefore no reason to expect Directors to serve beyond what is considered their most productive period.

Operational Questions

Question from Adrian Crocker (Provision for electric cars)

Provision for charging electric bike/cars

Response: We know that a few members have continued to ask the Society about electric charge points at houses. Even though creating an outside 13amp could be a short-term solution, it is felt this is not suitable. A review has taken place. The recommendation is we consider this cost for a few sites in 2022 – where we can trial use. Other matters need to be considered around where the charge points are sited etc. We will also explore what grants and options are feasible – to date we have not found any generous schemes.