b'Recharges to the private sector 1.17 Generally, if the council is making recharges to a private sector entity with the intent of seeking a trading profit, then the only powers to do so come from the Local Government Act 2003 (the 2003 Act) or the Localism Act 2011, s 4. Therefore, if the council is seeking to make a profit from the activity it should be delivered through a trading company. A limited liability partnership, for example, is not a permitted vehicle for the purposes of section 95 trading powers of the 2003 Act, and the commercial trading powers in the 2011 Act contain similar limitations. However, it must be noted that since the case of Peters v Haringey and Lendlease Europe Holdings1 (the Haringey case)the establishment or participation in a Limited Liability Partnership by a local authority could be an option where the local authority is not primarily acting for a commercial purpose but is pursuing other objectives through use of an LLP (see Rob Hanns sister publication Local Authority Companies and Partnerships for more information on this issue. Legal advice is necessary as this is a complex area of law.Procurement 1.18 A company created for commercial trading may be formed to provide services to the council that owns it; alternatively, it may trade with the world at large in the marketplace. If it does provide services to the shareholding council, it will need to take a view of whether a procurement exercise is necessary. The exemptions such as that under the Teckal2 decision may apply to wholly owned public sector companies set up to be in-house units of the owner authorities. The procurement arrangements for work awarded to the company from other councils will be a matter that they will need to consider in accordance with their financial standing orders and EU procurement rules. Regulation 12 of the Public Contract Regulations 2015 (PCR 2015) confirms that a subsidiary must undertake more than 80% of its activities in the performance of tasks entrusted to it by the parent contracting authority or by other subsidiaries of that parent. The introduction of the 80% threshold gives some flexibility for a new organisation to provide services to other local authorities/ organisations and, thus, expand and diversifyeffectively up to 20%this might be measured against turnover. Whether these rules will change if and when the UK exits from the European Union remains to be seen but these rules are likely to impact for a while yet.1[2018] EWHC 192 (Admin).2Teckal Srl v Comune di Viano, Azienda Gas-Acqua Consorziale di Reggio Emilia (Case C-107/98) (the Teckal case), concerned a complaint made against an Italian local authority which entered into a contract with a consortium set up by a number of municipalities without going out to tender. In this case, the ECJ for the first time held that a public body could bypass the EU procurement rules and directly enter into a contract with a service provider so long as the public body controls the service provider in question as if it was that public bodys own department; and the service provider in question carries out the essential part of its activities with the contracting authority which controls that entity. It is important to note that for the Teckal exemption to apply there should be no shareholding by the private sector, however small. The Teckal exempt is now embedded in the PCR 2015. Rob Hann, Local Authority Companies and Partnerships (Hann Books Ltd) covers this subject in more detail. 22'