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Scottish National Investment Bank Act 2020

The Act

Part 1 - Establishment of the Bank

Chapter 1 – Scottish Minister’s Duty to Establish the Bank

6.Section 1 (Duty to Establish the Bank)Section 1 places a duty on the Scottish Ministers to establish the Bank as a public company limited by shares. The Scottish National Investment Bank p.l.c is to have its registered office in Scotland and be owned solely by the Scottish Ministers. The Bank’s Articles of Association are to be framed in accordance with Chapter 2 (the Bank’s Articles of Association on establishment).

Chapter 2 - The Bank’s articles of association on establishment
Section 2 (The Bank’s vision)

7.Section 2 makes provision requiring that the Bank’s articles of association include a statement of the vision for the Bank.

Section 3 (The Bank’s objects)

8.Section 3 makes provision, for inclusion in Articles, about the Bank’s main object and ancillary objects (or objectives). The Bank’s main object situates the role of the Bank within the economic development powers devolved to the Scottish Government. The ancillary objects direct the Bank’s investment towards delivering against a broad range of outcomes which include creating and shaping new markets, promoting both environmental and social wellbeing, advancing equality and promoting fair work.

Section 4 (Ethical investment standards)

9.Section 4 provides that the Bank’s Board is responsible for instituting and implementing ethical standards that are aligned to the Bank’s objects and strategic missions, and for putting in place processes to ensure that the Bank adheres to those standards when making investment decisions. It further provides that responsibility for implementing these standards can be delegated to an appropriate body within the Bank’s governance structures or retained at Board level.

Section 5 (Balanced scorecard)

10.Section 5 makes provision, for inclusion in the Articles, for the preparation of a balanced scorecard to assist in the Bank’s preparation of reports. The balanced scorecard approach is a recognised performance management strategy that enables organisations to track performance against a range of outcomes. In preparing the balanced scorecard document, the Bank must consider the economic, social, environmental, or any other (financial or non-financial) impacts of its investments.

Section 6 (General powers)

11.Section 6 makes provision, for inclusion in the Articles, about the general powers of the Bank.

Section 7 (Borrowing powers)

12.Section 7 makes provision, for inclusion in the Articles, about the borrowing powers of the Bank. Under the fiscal framework agreement between the Scottish and UK governments(1), the Scottish Government has limited powers to borrow finance. Borrowing by the Bank from parties other than the Scottish Ministers would be counted towards the Scottish Government’s borrowing limit. Restrictions are therefore placed on the Bank’s ability to borrow to ensure it does not impact upon the Scottish Government’s fiscal position.

Section 8 (Ownership)

13.Section 8 makes provision, for inclusion in the Articles, about the ownership of the Bank, namely, that it can only be owned by the Scottish Ministers.

Section 9 (Directors: appointment)

14.Section 9 makes provision, for inclusion in the Articles, about the composition of the Board and sets out parameters for the appointment of Directors to the Board of the Bank.

Section 10 (Directors: tenure)

15.Section 10 makes provision, for inclusion in the Articles, about the tenure of Directors appointed to the Board of the Bank.

Section 11 (Remuneration)

16.Section 11 makes provision, for inclusion in the Articles, about the remuneration of the Bank’s directors and staff, namely that this is to be determined by the directors subject to any direction from the Scottish Ministers.

Section 12 (Committees)

17.Section 12 makes provision, for inclusion in the Articles, for the establishment of separate audit and risk committees and their respective functions.

Section 13 (Gender equality strategy)

18.Section 13 places a duty on the Bank to prepare and publish a gender equality strategy. The strategy must be developed in consultation with relevant persons and updated periodically. It also sets out specific requirements for what must be included in the strategy.

Section 14 (Entrenched provisions)

19.Section 14 makes provision, for inclusion in the Articles, that the Articles mentioned in Chapter 2 can only be amended or repealed in accordance with section 31 (procedure for modifying entrenched provisions).

Part 2 – Operational matters

Strategic missions

Section 15 (Setting missions)

20.Section 15 provides that the Scottish Ministers are to set strategic missions for the Bank. When setting these missions Scottish Ministers are required to issue the Bank with documentation detailing the socio-economic challenges that the Bank is to seek to address through its investments. Investments made under the missions should reflect and be aligned with the Bank’s object and ancillary objects.

Section 16  (Requirement to consult in relation to missions)

21.Section 16 requires that, before setting a new mission for the Bank, or modifying or bringing to an end an existing mission, the Scottish Ministers must conduct a public consultation lasting a minimum period of 40 days. This provision is, however, disapplied for the first set of missions to be set for the Bank.

Section 17 (Proposals from the Bank about its missions)

22.Provision is also made in section 17 to allow the Bank’s board to submit proposals to Scottish Ministers to set new missions or modify or end existing missions. A copy of any mission (or modification of any mission under the section) is to be laid before the Scottish Parliament and published.

Accountability

Section 18 (Reporting on Missions)

23.Section 18 provides that within three months of receiving a document from the Scottish Ministers under section 15 (setting missions) the Bank will report to the Scottish Minsters explaining how the Bank intends to respond to the mission. Section 18 also makes provision for similar reporting each financial year.

Section 19 (Report on investment performance)

24.Section 19 provides that at the end of each financial year the Bank must report to the Scottish Ministers on the performance of its investments. Scottish Ministers may also request performance reports at any other time during the financial year. Performance in this case includes both financial and non-financial performance such as the delivery of social, environmental and wider economic value.

Section 20 (Report on gender equality strategy)

25.Section 20 requires the Bank to prepare a report at least every two years on progress in delivering against its gender equality strategy (see section 13). It further provides that this report must then be laid in Parliament.

Section 21 (Review of performance)

26.Section 21 provides that a strategic review of the performance of the Bank and any subsidiaries of the Bank must take place at least every five years and that it is for the Scottish Ministers to appoint a person to carry out this review. A copy of the review will be laid before the Scottish Parliament and published. Section 21 requires that the Bank’s delivery against its objects, missions and relevant national performance indicators must be considered as part of the strategic review of performance.

Section 22 (Equal pay review)

27.Section 22 requires the Bank to periodically carry out an equal pay review and to report the outcomes this review to the Scottish Ministers. It further provides what this report should contain.

Fair Work

Section 23 (Fair work direction)

28.Section 23 requires the Scottish Ministers to issue a direction about fair work to the Bank and requires the Bank to comply with the direction. The direction is to set out that the Bank must seek to promote fair work. Furthermore, in issuing a direction, the Scottish Ministers are to define what “fair work” is for the purposes of that direction. The Scottish Ministers are required to consult persons who appear to them to represent the interests of workers and employers in Scotland, and the Bank itself, before issuing the direction.

Scottish Government financing of the Bank

Section 24 (Power to capitalise)

29.Section 24 gives the Scottish Ministers a power to capitalise the Bank by providing equity or loan capital.

30.Section 25 (Requirement to get State aid approval before significant capitalisation)

31.Section 25 provides that the Scottish Ministers may not spend more than the authorised minimum on capitalising the Bank unless any approvals necessary under State aid rules have been obtained. (Section 28 defines State aid rules.)

32.Under section 763 of the Companies Act 2006, the minimum share capital needed to establish a public limited company is £50,000. Section 16 permits sufficient capitalisation to allow the Scottish Ministers to establish the Bank as a public limited company. However, State aid approval is required to capitalise the Bank to the level which would enable it to fulfil its object and ancillary objects. This approach allows for sufficient flexibility to allow the Bank to be established and resourced so that it is able to undertake the entirety of its functions once State aid approval is given.

Section 26 (Power to finance)

33.Section 26 provides that the Scottish Ministers may provide such finance to the Bank as they consider necessary and that this includes taking and paying for shares in the Bank as well as the giving of grants, loans and guarantees.

Section 27 (Requirement to get State approval for financing)

34.Section 27 provides that the Scottish Ministers may not provide finance to the Bank by means of a grant unless any approvals necessary under State aid rules have been obtained. (Section 28 defines State aid rules.)

Section 28 (Meaning of State aid rules)

35.Section 28 makes provision as to the meaning of State aid rules and ensures that these align with domestic State aid rules following the UK’s exit from the European Union.

Miscellaneous provisions

Section 29 (Advisory group)

36.Section 29 provides that the Scottish Ministers must establish an advisory group to provide them with advice on the objectives, conduct and performance of the Bank.

Section 30 (Exercise of power to appoint non-executive directors)

37.Section 30 requires Ministers to consider the desirability of non-executive directors, across the Board as a whole, having experience or knowledge of the issues facing both workers and businesses in Scotland.

Section 31 (Procedure for modifying entrenched provisions)

38.Section 31 sets out the procedure for modifying entrenched Articles. It provides that those entrenched Articles of Association mentioned in Chapter 2 of Part 1 (the Bank’s Articles of Association on establishment) may only be made by a special resolution of the Bank’s members (the Scottish Ministers) and only if that special resolution has been laid before and approved by resolution of the Scottish Parliament.

Part 3 – Final Provisions

Section 32 (Application of public bodies legislation)

39.Section 32 introduces the schedule (see paragraphs 42 to 50 below).

Sections 33, 35 and 36 (Meaning of references to the Bank and subsidiaries, Commencement and Short title)

40.Sections 33, 35 and 36 make provision as to references to the Bank and its subsidiaries, commencement of the Act and its short title (i.e. the Scottish National Investment Bank Act 2020) respectively.

Section 34 (Ancillary provision)

41.Section 34 provides the Scottish Ministers with powers to make any ancillary provisions which are appropriate for the purposes of, or in connection with, or for giving full effect to the Act or any provision made under it.

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Fiscal framework: agreement between the Scottish and UK Governments:

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Explanatory Notes

Text created by the Scottish Government to explain what the Act sets out to achieve and to make the Act accessible to readers who are not legally qualified. Explanatory Notes were introduced in 1999 and accompany all Acts of the Scottish Parliament except those which result from Budget Bills.

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