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Close Leasing Limited: Section 172 Statement

Section 172(1) Statement and statement of engagement with other stakeholders

The directors provide the following statement pursuant to the Companies Act 2006 (as amended by Companies (Miscellaneous Reporting) Regulations 2018) (the “Act”) to describe how they have acted in accordance with their duty under Section 172 of the Act (“Section 172”) to promote the success of the company for the benefit of its member(s) as a whole, and in so doing, how they have had regard to those factors set out in Section 172, (1) (a) to (f) during the financial year.

Furthermore, in compliance with the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended by the Companies (Miscellaneous Reporting) Regulations 2018), the directors provide the statement which follows to describe how they have engaged with employees, and how they have had regard to employee interests and the need to foster the company’s business relationships with suppliers, customers and others, and in each case, the effect of that regard, including on the principal decisions taken by the company during the financial year.

Section 172 requires a director to have regard to the following matters, among others, when discharging their duty: the likely consequences of any decision in the long term; the interests of the Company’s employees; the need to foster the Company’s business relationships with suppliers, customers and others; the impact of the Company’s operations on the community and the environment; the desirability of the Company maintaining a reputation for high standards of business conduct; and the need to act fairly with members of the Company.

The Board of the company is collectively responsible for managing the affairs of the company to achieve its long-term prosperity by making important decisions, monitoring the underlying performance of the company, as well as being a means for establishing ethical standards. Understanding the interests of key stakeholders is an important part of CBG’s strategy and helps inform the directors’ decision making throughout the year.

Board meetings are held as required where the directors will consider the Company’s principal activities and make decisions. Meetings are scheduled to provide adequate time for consideration and discussion by the directors of the interests of stakeholders, and for the directors to seek further information from management, as required.  As a part of those meetings, the directors receive information in a range of different formats to assist them in discharging their responsibilities under Section 172 when making relevant decisions.  This information may include, among other things, reports and presentations on financial and operational performance, business updates, budget planning and forecasts, HR matters, as well as specific areas of engagement, such as employee opinion surveys. When making decisions, the Board seeks to understand the impact on each of its stakeholders, including the likely consequences of a decision in the long term, whilst acknowledging that a decision will not necessarily be favourable for all stakeholders, as there may be competing interests between them.

The Company is part of the wider Close Brothers Group (the “Group”), and as such it follows a range of group-wide policies in place to protect employees and provide a safe working environment, to ensure compliance with all regulatory requirements and adherence to the highest professional and ethical standards in dealing with customers, suppliers and colleagues, as well as ensuring that it continues to be  cognisant of its social and environmental responsibilities. In doing so, and by balancing the interests of the Company’s stakeholders when making decisions, the Board seeks to maintain a reputation for high standards of business conduct. Further information on these group-wide policies can be found in the annual report and accounts of the Company’s ultimate holding company, Close Brothers Group plc.

The Directors seeks to engage directly with stakeholders wherever possible on certain issues, though the size of the Group means that stakeholder engagement often takes place at an operational or Group level. This approach creates greater efficiency and facilitates a greater positive impact on environmental, social and other issues than may be possible at an individual company level, as well as ensuring consistency of approach across the Group. Where engagement has taken place at an operational level, the outcome of that engagement has been brought to the Board for its consideration where relevant throughout the year. During the financial year, engagement with stakeholders has been modified in response to the COVID-19 regulations and Government guidance, and has taken place virtually where appropriate. Additional details on engagement at Group level with stakeholders, including employees, suppliers, customers, the community and environment can be found in the Strategic Report section of the Annual Report and Accounts of Close Brothers Group plc.

The table and case studies below set out further examples of the ways in which the Board has engaged directly and indirectly with stakeholders during the financial year, as well as detailing how the Directors have had regard to employee interests and the need to foster the company’s business relationships with suppliers, customers and others, and the effect of that regard, including on principal decisions taken throughout the year, as well as matters set out in Section 172 (1)(a)-(f) when discharging their duties under Section 172.

 

Our Stakeholders

Colleagues

Why we focus on them and the impact of engagement  

  • The board recognises the importance of the contribution made by our employees, who deliver the highest levels of service for our customers and clients

  • Engagement with employees helps to attract, build and retain a high calibre talent pool, and ensure that employees remain enthusiastic about their work and their organisation

Stakeholders’ key priorities and areas of focus

  • A safe working environment
  • A fair, supportive, diverse and inclusive culture where employee feedback is valued
  • Ensuring appropriate rewards for their contributions
  • Opportunities for training and development
  • Long-term successful performance of the company

How the board and management engage and consider stakeholder interests

  • Regular updates on employee-issues arising from the COVID-19 pandemic, including the response to lockdowns, the continuation of homeworking, reviewing wellbeing issues, the discussion of employee opinion surveys and return to workplace planning
  • Pro-active engagement from directors to identify optimal future working practices for all roles across the company, ensuring customer needs and risk are prioritised alongside encouraging team collaboration and enabling greater flexibility for colleagues
  • Regular communications with employees on financial, strategic and operational matters via emails and videos, participation in Town Halls, site visits and Q&A sessions
  • Consideration of employee-related issues connected with projects [and transformation programmes]
  • [Engagement with employees in board meetings and other sessions on relevant topics]
  • Review and discussion of a quarterly culture dashboard by local Risk and Compliance Committee, providing an overview of matters relating to culture, conduct and values
  • Support for and attendance at development and training programmes attended by employees at different levels
  • Ongoing activity to encourage employee participation in the Group’s SAYE and BAYE share schemes
  • Consideration of employee views in individual decisions made by the board, including issues relating to ongoing investment decisions
  • Implementation of comprehensive whistle-blowing procedures and encouragement to employees to report relevant matters
  • Engagement with employees via Group-wide diversity & inclusion initiatives and working groups

 

Customers, clients and partners

Why we focus on them and the impact of engagement  

  • The needs of our customers, clients and partners are at the heart of our business and are core to the purpose of helping the people and businesses of Britain thrive over the long term. We are focused on upholding reliable, high quality services and a personal approach.
  • Our long-term success depends on the strength of our relationships with customers, clients and partners, our specialist expertise and maintaining high standards of service. As such, central to all decision-making is understanding how our actions can help them and their businesses thrive.

Stakeholders’ key priorities and areas of focus

  • A customer-led proposition
  • A focus on treating customers fairly and doing the right thing
  • Strong personal relationships and specialist expertise
  • Consistent and supportive customer service whatever the market conditions
  • A responsive service with solutions that are flexible, responsive and executed with speed
  • Relationships are built on quality and trust

How the board and management engage and consider stakeholder interests

  • Updates to the board on, and consideration of, the impact of COVID-19 on customers, clients and partners, including regular updates on operational matters and reviews of information relating to the provision of forbearance and COVID-19 related concessions to customers
  • Review of customer metrics and engagement scores, and updates on a wide range of matters relating to customer issues, including complaints
  • Meetings with clients, customers and partners
  • Monitoring and analysis of complaints and activity to ensure we treat customers fairly and deliver on our promises
  • Customer client and operations updates to the board by management
  • Discussion of customer, client and partner considerations in individual decisions to be made by the board, including as part of major investment programmes
  • Consideration of customer and conduct related issues during the year in relation to particular projects
  • Discussion on sustainable commercial opportunities being considered for our customers, clients and partners
  • Consideration of conduct matters as part of the culture dashboard reviewed by the local Risk and Compliance Committee 

 

Regulators and Government

Why we focus on them and the impact of engagement  

  • The company values an open and transparent relationship with all our regulators, as well as government authorities and trade associations.

  • It is important we maintain a culture that is focused on retaining and encouraging high standards of business conduct and regulatory compliance and openness. Engaging with the relevant regulators and associations helps to ensure the business is aligned to the evolving regulatory framework.

Stakeholders’ key priorities and areas of focus

  • Fair treatment of customers and clients
  • Compliance with applicable regulation
  • Recognition of the importance of resilience and risk management
  • Provision of high quality information and regulatory reporting
  • Active consideration of risks relating to sustainability and other climate matters
  • Transparent Group tax strategy

How the board and management engage and consider stakeholder interests

  • Regular reporting and discussion on broader regulatory developments and compliance considerations during the year, including interactions during COVID-19
  • Regulatory risk and compliance reporting to local Risk and Compliance Committee
  • Consideration of the regulatory horizon including via risk and compliance reports
  • Consideration of relevant policies and standards that support compliance with regulatory and compliance requirements
  • Provision of regulatory correspondence to the board including review by the board of resultant recommendations and actions
  • Participation in broader Group regulatory initiatives and programmes, including activity to support the ICAAP, RRP and ILAAP processes
  • Oversight of training for all employees on applicable regulatory requirements

 

Suppliers

Why we focus on them and the impact of engagement  

  • Our business is supported by a large number of suppliers, enabling us to provide high standards of service to our customers, clients and partners, whilst also allowing them to access innovative products and services.

  • Engagement with our suppliers enables the company to develop and maintain long-term and sustainable relationships. This engagement enables our suppliers to better understand and align to our risk management requirements and operate responsibly.

Stakeholders’ key priorities and areas of focus

  • Strong and sustainable relationships with Close Brothers
  • Fair and equitable conduct of business
  • Appropriate and clear payment procedures
  • An understanding of the company’s purpose and strategy
  • Robust risk management framework

How the board and management engage and consider stakeholder interests

  • Updates on, and consideration of, the impact of COVID-19 and lockdowns on suppliers and partners
  • Meetings and other engagement with suppliers and ongoing updates on performance, including through the broader Close Brothers’ Third Party Management function (“TPM”)
  • Consideration and approval of contracts with suppliers and ongoing supplier relationship management through TPM
  • [Established processes for the management of supply chain risks and issues, with escalation to the Board and management as appropriate
  • Consideration of relevant policies and internal processes
  • Consideration of supplier issues as part of updates on relevant projects and programmes
  • Oversight and monitoring of key supplier relationships by the board

 

Communities and Environment

Why we focus on them and the impact of engagement  

  • As part of the broader Group, the board is committed to contributing lasting value and making a positive impact on the society in which we operate and the environment more broadly.

  • Engaging with local communities helps the board and our employees develop our understanding of our clients, customers and partners so that we can support them and help them to achieve their ambition, whilst also building employee engagement.

  • We firmly believe that environmental considerations should form an integral part of the decisions we make as a business and employees are actively engaged on responsible behaviours and environmental issues.

Stakeholders’ key priorities and areas of focus

  • A suitable strategy for approaching sustainability issues
  • Support for community initiatives
  • Job creation and social mobility
  • A long-term focus on addressing the impacts of climate change

How the board and management engage and consider stakeholder interests

  • Consideration of the significance of ESG matters to the company’s activities, including climate change related developments and the identification and assessment of the significant ESG risks to the company, as part of the wider Close Brothers group
  • Director and management participation in sustainability working groups and other internal forums
  • Updates to the board on community engagement programmes
  • Participation by management in local charitable and volunteering activities
  • Actively encouraging employees to contribute to community and charity events and to fundraise and volunteer for charities, including the broader Group’s charity partners
  • Consideration of the Group’s wider environmental strategy, activities and goals, and the contribution that the company can make to make a positive contribution to the world around us

 

Shareholder

Why we focus on them and the impact of engagement  

  • The company is a wholly owned member of the Close Brothers Group, forming part of the Commercial division; as such it operates as part of the broader Group in delivering its purpose and strategic objectives, in line with Group-wide processes, governance and culture

  • Engagement supports the company’s understanding of, and contribution to, broader Group activities and strategic aims, and ensures delivery of long-term sustainable value for our shareholder in line with Group policies and standards

Stakeholders’ key priorities and areas of focus

  • Focus on broader Group purpose and strategic aims, including financial resilience through the cycle
  • Alignment with Group-wide risk, governance, compliance and financial priorities, including with regard to environmental and social responsibility
  • Consistent approach to stakeholder considerations and outcomes
  • Sustainable and consistent business model

How the board and management engage and consider stakeholder interests

  • Although the company has a sole shareholder, the company’s directors, have appropriate oversight of, and regard to, wider Group investor interests and considerations when making decisions
  • Updates to Group level committees, including the Close Brothers Group plc board on the operation and performance of the company
  • Participation in Group-wide initiatives and programmes (including those that support consideration of the company’s other stakeholder groups including customers, employees and suppliers
  • Budget and financial plans developed as part of wider Group process
  • Participation in broader enterprise-wide risk, regulatory and compliance initiatives

 

Furthermore, set out below are some additional detailed examples of the ways in which the board of the company has engaged directly with key stakeholders during the financial year, how stakeholder interests have been considered in the decision-making of the directors, and how the Directors have had regard to the matters set out in Section 172 (1)(a)-(f) when discharging their duties under Section 172.  The company is a wholly owned subsidiary of Close Brothers Limited and, as such, the duty of directors to have regard to the need to act fairly as between members of the company is limited.

Ongoing response to Covid-19

The impact of Covid-19 on the company’s stakeholder groups and the evolving challenges this presented for them during lockdowns and subsequent re-openings remained at the forefront of the board’s mind when making decisions and overseeing the company’s ongoing response throughout Covid-19.

The board’s approach was focused on maximising support for customers, clients and partners through the Covid-19 period, in line with the wider group purpose of helping the people and businesses of Britain thrive over the long term.

As part of the board’s regular updates on the company’s trading and performance, specific consideration was given to any developments related to Covid-19 and how this impacted both customer activity and business volumes. In particular, the impact of lockdowns was assessed, with specific consideration given to customer, partner and employee perspectives and how these were evolving in response to changing market conditions.

The board remained aware of the continued challenges presented by homeworking and ensured that close engagement between management and employees was maintained, for example through regular Town Halls and other internal communications, with the morale and wellbeing of employees remaining of paramount concern.

Transition from LIBOR

Regulatory and industry changes remain a key priority for the board. LIBOR is the main benchmark interest rate used by the company and it will cease at the end of calendar year 2021.

As part of readying the company and its customers for this industry and regulatory change, an internal project team was established by the company to effectively manage a smooth transition to a new benchmark interest rate and ensure clear communication and assistance with customers. The board has been provided with regular updates on the status of the project including discussions regarding an appropriate alternative benchmark interest rate and managing communication and resolutions with customers.

Stakeholder considerations, and the factors set out in section 172(1), were at the heart of the decision-making process.  As part of their decision making, the directors considered the appropriate FCA guidance that neither the customer nor the company should financially lose out due to this change and adhering to the FCA treating customers fairly principles.