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Health and Social Care BillPage 150

Part 4 NHS foundation trusts & NHS trusts

Governance and management

151 Governors

(1) 5In paragraph 7 of Schedule 7 to the National Health Service Act 2006 (public
benefit corporation to have governors)—

(a) in sub-paragraph (1), for “a board of governors” substitute “a council of
governors”, and

(b) in sub-paragraphs (2), (3) and (4), for “the board” substitute “the
10council”.

(2) Omit paragraph 9(3) of that Schedule (requirement for at least one member of
council of governors to be appointed by PCT).

(3) For paragraph 9(7) of that Schedule (partnership organisations) substitute—

(7) Any organisation specified in the constitution for the purposes of
15this sub-paragraph may appoint one or more members of the council
(but no more than the number specified for those purposes in the
constitution).

(4) After paragraph 10 of that Schedule insert—

10A The general duties of the council of governors are—

(a) 20to hold the non-executive directors individually and
collectively to account for the performance of the board of
directors, and

(b) to represent the interests of the members of the corporation as
a whole and the interests of the public.

(5) 25After paragraph 10A of that Schedule insert—

10B A public benefit corporation must take steps to secure that the
governors are equipped with the skills and knowledge they require
in their capacity as such.

(6) After paragraph 10B of that Schedule insert—

10C 30For the purpose of obtaining information about the corporation’s
performance of its functions or the directors’ performance of their
duties (and deciding whether to propose a vote on the corporation’s
or directors’ performance), the council of governors may require one
or more of the directors to attend a meeting.

(7) 35In paragraph 23(4) of that Schedule (persons eligible for appointment as
auditor by governors), in sub-paragraph (c), for “the regulator” substitute “the
Secretary of State”.

(8) In paragraph 26(2) of that Schedule (information that must be given in annual
reports etc.), after paragraph (a) insert—

(aa) 40information on any occasions in the period to which the
report relates on which the council of governors exercised its
power under paragraph 10C,.

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(9) In consequence of subsection (1)—

(a) in sections 33(4)(a) (in each place it appears), 35(2)(c) and (5)(c), 39(3)(a),
59(1), (2)(b) and (5) and 60(1) of that Act, for “board of governors”
substitute “council of governors”,

(b) 5in section 60(2) and (3) and paragraphs 8 to 14, 17, 18, 20, 21, 23, 27 and
28 of Schedule 7 to that Act, for “the board” (in each place it appears)
substitute “the council”,

(c) for the cross-heading preceding paragraph 7 of that Schedule substitute
“Council of Governors”,

(d) 10in the cross-heading preceding paragraph 28 of that Schedule, for
“board” substitute “council”, and

(e) in paragraphs 4(2) and 5(1) of Schedule 10 to that Act, for “board of
governors” substitute “council of governors”.

152 Directors

(1) 15After paragraph 18 of Schedule 7 to the National Health Service Act 2006
insert—

18A The general duty of the board of directors, and of each director
individually, is to act with a view to promoting the success of the
corporation so as to maximise the benefits for the members of the
20corporation as a whole and for the public.

(2) After paragraph 18A of that Schedule insert—

18B (1) The duties that a director of a public benefit corporation has by virtue
of being a director include in particular—

(a) a duty to avoid a situation in which the director has (or can
25have) a direct or indirect interest that conflicts (or possibly
may conflict) with the interests of the corporation;

(b) a duty not to accept a benefit from a third party by reason of
being a director or doing (or not doing) anything in that
capacity.

(2) 30The duty referred to in sub-paragraph (1)(a) is not infringed if—

(a) the situation cannot reasonably be regarded as likely to give
rise to a conflict of interest, or

(b) the matter has been authorised in accordance with the
constitution.

(3) 35The duty referred to in sub-paragraph (1)(b) is not infringed if
acceptance of the benefit cannot reasonably be regarded as likely to
give rise to a conflict of interest.

(4) In sub-paragraph (1)(b), “third party” means a person other than—

(a) the corporation, or

(b) 40a person acting on its behalf.

(3) After paragraph 18B of that Schedule insert—

18C (1) If a director of a public benefit corporation has in any way a direct or
indirect interest in a proposed transaction or arrangement with the
corporation, the director must declare the nature and extent of that
45interest to the other directors.

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(2) If a declaration under this paragraph proves to be, or becomes,
inaccurate or incomplete, a further declaration must be made.

(3) Any declaration required by this paragraph must be made before the
corporation enters into the transaction or arrangement.

(4) 5This paragraph does not require a declaration of an interest of which
the director is not aware or where the director is not aware of the
transaction or arrangement in question.

(5) A director need not declare an interest—

(a) if it cannot reasonably be regarded as likely to give rise to a
10conflict of interest;

(b) if, or to the extent that, the directors are already aware of it;

(c) if, or to the extent that, it concerns terms of the director’s
appointment that have been or are to be considered—

(i) by a meeting of the board of directors, or

(ii) 15by a committee of the directors appointed for the
purpose under the constitution.

(4) After paragraph 18C of that Schedule insert—

18D (1) Before holding a meeting, the board of directors must send a copy of
the agenda of the meeting to the council of governors.

(2) 20As 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.

(5) After paragraph 18D of that Schedule insert—

18E (1) The constitution must provide for meetings of the board of directors
25to be open to members of the public.

(2) But the constitution may provide for members of the public to be
excluded from a meeting for special reasons.

153 Members

(1) In section 61 of the National Health Service Act 2006 (representative
30membership), the existing text becomes subsection (1) and, in that subsection,
for “An authorisation may require an NHS foundation trust to” substitute “An
NHS foundation trust must”.

(2) After that subsection insert—

(2) In deciding which areas are to be areas for public constituencies, or in
35deciding whether there is to be a patients’ constituency, an NHS
foundation trust must have regard to the need for those eligible for
such membership to be representative of those to whom the trust
provides services.

154 Accounts: initial arrangements

(1) 40In paragraph 24 of Schedule 7 to the National Health Service Act 2006

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(accounts: general), for sub-paragraph (1) substitute—

(1) A public benefit corporation must keep proper accounts and proper
records in relation to the accounts.

(1A) The regulator may with the approval of the Secretary of State give
5directions to the corporation as to the content and form of its
accounts.

(2) In sub-paragraph (3) of that paragraph, in paragraph (b) for “any records”
substitute “the records”.

(3) In paragraph 25 of that Schedule (annual accounts), in sub-paragraph (1), for
10“the Treasury” substitute “the Secretary of State”.

(4) After sub-paragraph (1) of that paragraph insert—

(1A) The regulator may with the approval of the Secretary of State direct
a public benefit corporation—

(a) to prepare accounts in respect of such period or periods as
15may be specified in the direction;

(b) that any accounts prepared by it by virtue of paragraph (a)
are to be audited in accordance with such requirements as
may be specified in the direction.

(5) In sub-paragraph (2) of that paragraph—

(a) 20after “annual accounts” insert “or in preparing any accounts by virtue
of sub-paragraph (1A)(a)”,

(b) for “the Treasury” substitute “the Secretary of State”, and

(c) for “information to be given in” substitute “content and form of”.

(6) In sub-paragraph (3) of that paragraph, after “annual accounts” insert “, or of
25any accounts to be prepared by it by virtue of sub-paragraph (1A)(a),”.

(7) In sub-paragraph (4) of that paragraph, in paragraph (b)—

(a) omit “once it has done so,”, and

(b) at the end insert “within such period as the regulator may direct”.

(8) After that sub-paragraph insert—

(4A) 30The corporation must send to the regulator within such period as the
regulator may direct—

(a) a copy of any accounts prepared by the corporation by virtue
of sub-paragraph (1A)(a), and

(b) a copy of any report of an auditor on them prepared by virtue
35of sub-paragraph (1A)(b).

155 Accounts: variations to initial arrangements

(1) In paragraph 24 of Schedule 7 to the National Health Service Act 2006
(accounts: general), in sub-paragraph (1A), for “The regulator may with the
approval of the Secretary of State” substitute “The Secretary of State may with
40the approval of the Treasury”.

(2) In sub-paragraph (5) of that paragraph, for “the regulator” substitute “the
Secretary of State”.

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(3) In paragraph 25 of that Schedule (annual accounts), in sub-paragraph (1), for
“the regulator may with the approval of the Secretary of State” substitute “the
Secretary of State may with the approval of the Treasury”.

(4) In sub-paragraph (1A) of that paragraph, for “The regulator may with the
5approval of the Secretary of State” substitute “The Secretary of State may with
the approval of the Treasury”.

(5) In sub-paragraph (2) of that paragraph, for “the regulator with the approval of
the Secretary of State” substitute “the Secretary of State with the approval of
the Treasury”.

(6) 10In sub-paragraphs (3), (4) and (4A) of that paragraph, for “the regulator”, in
each place it appears, substitute “the Secretary of State”.

(7) This section applies to such financial year as is specified in the order under
section 306 that brings the preceding provisions of this section into force (and
to the subsequent financial years); accordingly, this section does not affect the
15application of paragraphs 24 and 25 of Schedule 7 to the National Health
Service Act 2006 (as amended by section 154) to the financial years preceding
the specified financial year.

(8) In subsection (7), “financial year” has the meaning given in section 275(1) of the
National Health Service Act 2006.

156 20Annual report and forward plan

(1) In sub-paragraph (2) of paragraph 26 of Schedule 7 to the National Health
Service Act 2006 (information that must be included in annual report), after
paragraph (aa) (inserted by section 151(8)) insert—

(ab) information on the corporation’s policy on pay and on the
25work of the committee established under paragraph 18(2)
and such other procedures as the corporation has on pay,

(ac) information on the remuneration of the directors and on the
expenses of the governors and the directors,.

(2) After that sub-paragraph insert—

(2A) 30Before imposing a requirement under sub-paragraph (2)(b) that the
regulator considers is sufficiently significant to justify consultation,
the regulator must consult such persons as it considers appropriate.

(3) The Secretary of State may by order—

(a) amend sub-paragraph (2) of paragraph 26 of that Schedule so as to
35substitute for paragraph (b) the following—

(b) such other information as may be prescribed., and

(b) repeal sub-paragraph (2A) of that paragraph.

(4) In paragraph 27(1) of that Schedule (duty to send forward plan to regulator),
for “the regulator” substitute “the Secretary of State”.

(5) 40Omit section 39(2)(e) of that Act (requirement for copy of forward plan to be on
register).

(6) In paragraph 22(1) of Schedule 7, omit paragraph (e) (duty to make forward
plan available to the public).

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157 Meetings

(1) After paragraph 27 of Schedule 7 to the National Health Service Act 2006
insert—

Annual meeting of members

27A (1) 5A public benefit corporation must hold an annual meeting of its
members.

(2) The meeting must be open to members of the public.

(3) At least one member of the board of directors of the corporation must
attend the meeting and present the following documents to the
10members at the meeting—

(a) the annual accounts,

(b) any report of the auditor on them,

(c) the annual report.

(4) Where an amendment is made to the constitution in relation to the
15powers or duties of the council of governors of a public benefit
corporation (or otherwise with respect to the role that the council has
as part of the corporation)—

(a) at least one member of the council of governors must attend
the next meeting to be held under this paragraph and present
20the amendment, and

(b) the corporation must give the members an opportunity to
vote on whether they approve the amendment.

(5) If more than half of the members voting approve the amendment, the
amendment continues to have effect; otherwise, it ceases to have
25effect and the corporation must take such steps as are necessary as a
result.

(2) In paragraph 28 of that Schedule (meeting of council of governors to consider
annual accounts and reports), the existing text of which becomes sub-
paragraph (1), after that sub-paragraph insert—

(2) 30Nothing in sub-paragraph (1) prevents the council of governors from
holding a general meeting more than once a year.

(3) After that paragraph insert—

Combined meetings of members and governors

28A A public benefit corporation may hold a meeting which combines a
35meeting under paragraph 27A with a meeting under paragraph 28.

158 Voting

(1) After paragraph 29 of Schedule 7 to the National Health Service Act 2006
insert—

Power to make provision about voting

30 (1) 40Regulations may amend this Chapter so as to add, vary or omit
provision relating to voting by members of the council of governors

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of a public benefit corporation that is an NHS foundation trust, by its
directors or by its members.

(2) The power under sub-paragraph (1) is exercisable only in relation to
provision in this Chapter that was inserted, or otherwise provided
5for, by Part 4 of the Health and Social Care Act 2012.

(2) In section 64(3) of that Act (regulations under Chapter 5 of Part 2 of that Act
that are subject to affirmative procedure), after paragraph (a) (but before the
“or” following it) insert—

(aa) regulations under paragraph 30(1) of Schedule 7,.

10Foundation trust status

159 Authorisation

(1) In section 30(1) of the National Health Service Act 2006 (definition of NHS
foundation trust), for “which is authorised under this Chapter to provide”
substitute “the function of which is to provide in accordance with this
15Chapter”.

(2) Omit section 33(2)(a) of that Act (requirement for application for authorisation
to describe goods and services to be provided).

(3) In section 35(2) of that Act (matters as to which the regulator must be satisfied
before giving authorisation), for paragraph (e) substitute—

(e) 20the applicant will be able to provide goods and services for the
purposes of the health service in England,.

(4) After section 35(3) of that Act (things the regulator must consider before
deciding whether it is satisfied as to the matters in section 35(2)) insert—

(3A) The regulator must not give an authorisation unless it is notified by the
25Care Quality Commission that it is satisfied that the applicant is
complying with (so far as applicable) the requirements mentioned in
section 12(2) of the Health and Social Care Act 2008 in relation to the
regulated activity or activities the applicant carries on.

(3B) In subsection (3A), “regulated activity” has the same meaning as in
30section 8 of the Health and Social Care Act 2008.

(5) Omit section 35(4) and (7) of that Act (power to give authorisation on terms the
regulator considers appropriate).

(6) Omit section 38 of that Act (variation of authorisation).

(7) Omit section 39(2)(b) of that Act (requirement for copy of authorisation to be
35on register).

(8) Omit section 49 of that Act (authorisation to require trust to allow regulator to
enter and inspect trust’s premises).

(9) Omit paragraph 22(1)(b) of Schedule 7 to that Act (requirement for copy of
authorisation to be available for public inspection).

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160 Bodies which may apply for foundation trust status

(1) Omit section 34 of the National Health Service Act 2006 (application for
authorisation by body other than NHS trust).

(2) In section 35(1) of that Act (bodies which may be given authorisation), omit
5paragraph (b) (public benefit corporations) and the preceding “or”.

(3) Omit section 36(2) of that Act (public benefit corporation to become NHS
foundation trust on being given authorisation).

(4) Despite subsection (1)—

(a) section 34(1) to (4) of that Act continues to have effect in the case of an
10application which, immediately before the commencement of that
subsection, is pending determination, and

(b) section 34(5) to (7) of that Act continues to have effect in the case of an
existing public benefit corporation.

(5) Despite subsection (2), section 35(1)(b) of that Act continues to have effect in
15the case of an existing public benefit corporation which, immediately before
the commencement of that subsection, has not been given an authorisation
under section 35.

(6) Despite subsection (3), section 36(2) of that Act continues to have effect in the
case of an existing public benefit corporation.

(7) 20In subsections (4) to (6), “existing public benefit corporation” means a public
benefit corporation—

(a) incorporated under section 34 of that Act and in existence immediately
before the commencement of this section, or

(b) incorporated under that section by virtue of subsection (4).

161 25Amendment of constitution

(1) In section 37 of the National Health Service Act 2006 (amendments of
constitution), the existing text of which becomes subsection (1), for “with the
approval of the regulator” substitute only if—

(a) more than half of the members of the council of governors of the
30trust voting approve the amendments, and

(b) more than half of the members of the board of directors of the
trust voting approve the amendments.

(2) After that subsection insert—

(2) Amendments made under this section take effect as soon as the
35conditions in subsection (1)(a) and (b) are satisfied.

(3) But an amendment is of no effect in so far as the constitution would, as
a result of the amendment, not accord with Schedule 7.

(4) The trust must inform the regulator of amendments made under this
section; but the regulator’s functions do not include a power or duty to
40determine whether or not the constitution, as a result of the
amendments, accords with Schedule 7.

(3) Subsections (1) and (2) do not apply in the case of amendments in respect of
which, immediately before the commencement of this section, Monitor has yet

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to decide whether or not to give approval under section 37 of the National
Health Service Act 2006.

162 Panel for advising governors

After section 39 of the National Health Service Act 2006 insert—

39A 5Panel for advising governors

(1) The regulator may appoint a panel of persons to which a governor of
an NHS foundation trust may refer a question as to whether the trust
has failed or is failing—

(a) to act in accordance with its constitution, or

(b) 10to act in accordance with provision made by or under this
Chapter.

(2) A governor may refer a question to the panel only if more than half of
the members of the council of governors voting approve the referral.

(3) The panel—

(a) 15may regulate its own procedure, and

(b) may establish such procedures, and make such other
arrangements, as it considers appropriate for the purpose of
determining questions referred to it under this section.

(4) The panel may decide whether, or to what extent, to carry out an
20investigation on a question referred to it under this section.

(5) The panel may for that purpose, or for the purpose of carrying out such
an investigation, request information or advice.

(6) Where the panel has carried out such an investigation, it must publish
a report of its determination of the question referred to it.

(7) 25If a person refuses to comply with a request made under subsection (5),
the report under subsection (6) may refer to the refusal.

(8) On any proceedings before a court or tribunal relating to a question
referred to the panel under this section, the court may take the panel’s
report of its determination of the question into account.

(9) 30The regulator—

(a) must pay expenses properly incurred by the panel, and

(b) must make administrative support available to the panel.

(10) Regulations may make provision as to—

(a) eligibility for membership of the panel;

(b) 35the number of persons that may be appointed as members;

(c) the terms of appointment of members;

(d) circumstances in which a person ceases to be a member or may
be suspended.

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Finance

163 Financial powers etc.

(1) At the end of section 40 of the National Health Service Act 2006 (power of
Secretary of State to give financial assistance to NHS foundation trusts),
5insert—

(5) As soon as is practicable after the end of each financial year, the
Secretary of State must prepare a report on the exercise of the power
under subsection (1).

(6) In relation to each exercise of the power under that subsection during
10the year to which the report relates, the report must specify the amount
of the loan, issue of public dividend capital, grant or other payment
and—

(a) in the case of a loan, the amount (if any) outstanding at the end
of the year and the other terms on which the loan was made,

(b) 15in the case of an issue of public dividend capital, the terms on
which it was issued (or, where a decision under section 42(3) is
made in relation to it during that year, the terms so decided as
those on which it is treated as having been issued), and

(c) in the case of a grant or other payment, the terms on which it
20was made.

(7) In relation to each loan made under that subsection during a previous
financial year but not repaid by the beginning of the year to which the
report relates, the report must specify—

(a) the amount outstanding at the beginning of the year,

(b) 25the amount (if any) outstanding at the end of the year, and

(c) the other terms on which the loan was made.

(8) A report under subsection (5) must, in relation to each NHS foundation
trust, specify—

(a) the amount of the public dividend capital of that trust at the end
30of the year to which the report relates, and

(b) the conditions on which it is held.

(9) The Secretary of State must publish a report under subsection (5).

(2) Omit section 41 of that Act (prudential borrowing code).

(3) In section 42 of that Act (public dividend capital), omit subsection (4) (dividend
35payable by NHS foundation trust to be same as that payable by NHS trust).

(4) Omit subsection (5) of that section (requirement for Secretary of State to consult
the regulator).

(5) At the end of that section insert—

(7) The terms which may be decided under subsection (3) include terms to
40which the exercise of any power of an NHS foundation trust to do any
of the following will be subject as a consequence—

(a) providing goods or services,

(b) borrowing or investing money,

(c) providing financial assistance,

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