Local Government Reorganisation: The liabilities councils can't afford to overlook

Peter Collins warns local authorities not to ignore what sits within each company when planning before vesting day.

Corporate structures can sometimes create the impression that assets, contracts and liabilities sit at arm's length from the council itself.

In reality, understanding exactly what sits within each company becomes increasingly important as Local Government Reorganisation progresses.

Before vesting day, councils should ensure they have a clear picture of the commitments held within every corporate vehicle.

Looking beyond the balance sheet

Some council-owned companies own significant property portfolios.

Others hold long-term commercial contracts, borrowing arrangements or operational responsibilities.

Understanding those commitments requires more than reviewing constitutional documents.

Authorities should consider:

• What assets are owned or leased?
• What borrowing arrangements are in place?
• Are there council guarantees or indemnities?
• Which commercial contracts remain active?
• Are there ongoing disputes or legal claims?

Each answer helps build a more complete understanding of the organisation that will ultimately transfer into the new authority.

Due diligence creates certainty

Periods of organisational change naturally bring additional complexity.

Undertaking appropriate due diligence before vesting day helps identify issues that might otherwise emerge later, when resolving them becomes more difficult.

The objective is not simply to identify risk. It is to ensure informed decision-making throughout the transition.

Seeing the whole picture

Corporate vehicles rarely operate in isolation.

Property interests, contractual relationships and financial commitments often connect directly with wider council services and strategic priorities.

Understanding those connections allows authorities to plan with greater confidence and avoid unexpected issues after reorganisation.

Looking ahead

A comprehensive understanding of assets, liabilities and contractual commitments provides an important foundation for a successful transition.

The earlier that work begins, the better equipped councils will be to manage both legal risk and operational continuity.

Please contact Peter Collins if you would like to discuss any of the issues raised in this article or how they may affect your authority.

Peter Collins is a Partner at Sharpe Pritchard LLP.

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This article is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published. If you would like further advice and assistance in relation to any issue raised in this article, please contact us by telephone or email This email address is being protected from spambots. You need JavaScript enabled to view it..