Academy Conversion Questions & Answers
Tollers’ academies team are currently assisting a number of schools who, following the Academies Bill 2010, are in the process of converting to an academy.
Our experience of supporting schools through the conversion process has shown that there are a few common questions raised by all schools:-
Q) If the school receives the £25,000 grant will it have to pay it back if the school decides not to convert?
The grant can only be used for specific circumstances, such as obtaining legal advice, the costs of software licence transfers, HR TUPE advice, rebranding costs and expenses incurred in setting up the academy trust. You will need to retain records to show that the grant was used for the specific purposes.
In the event that the conversion does not occur then any unused grant should be repaid to the Department for Education within 10 working days of notifying them that the school is withdrawing its application to convert. Alternatively in the event of a successful conversion, any unused element of the grant should be transferred to the Academy Trust.
Q) What rules apply to Admissions?
The Academy will need to provide education for pupils of differing abilities and clause 12 of the model funding agreement obliges the academy trust to ensure that their admissions policy and arrangements for the school accord with admissions law and the provisions of the DfE School Admissions Code and the School Admission Appeals Code. An annex to the funding agreement expands on this and in summary provides that the Academy Trust will:
- Act (and ensure that its independent appeal panel is trained to act) in accordance with all relevant codes
- Establish an independent appeal panel
- Operate arrangements for appeals
- Take part in any mandatory admissions forums and coordinated admission arrangements established by the local authority
The DfE can direct the Academy Trust to amend its admission arrangements where it fails to comply with the admissions code.
Q) What regulations apply to exclusions?
In general the Academy Trust shall act and ensure that the head teacher acts in accordance with the law on exclusions as if the academy were a maintained school. The Academy Trust shall ensure that the local authority is informed of any exclusion decision in the same circumstances as required by a maintained school. The Academy Trust also needs to have regard to the Secretary of State’s guidance on exclusions including the guidance on the appeals process. However, the duty differs from maintained schools, as the Academy Trust will need to make the arrangements for enabling appeals against the decision of the governing body. The governing body of the Academy Trust is not expected to seek the advice of the local authority officer when considering the exclusion; however, the local authority officer may attend any meeting if they are requested to by a parent.
Q) What is a Trading Company and how the Academy Trust might use one manage its finances?
The reasons for using a separate trading company are relating to VAT and preferential accounting treatment so this is best addressed by your accountant. It is usual that a separate trading company is used if the school generates a considerable income from business activities which do not relate wholly to the provision of education i.e. the letting of school buildings.
There are two main reasons for setting up a trading company 1) all transactions where VAT applies can be separated from the finances of the Academy and 2) the articles of association prevent any ‘substantial permanent trading’ by the Academy Trust.
It is usual that the Academy is opened first and then the accountants will work with you to set up the trading subsidiary. Largely the need for a separate trading company depends on the income that the trading activity generates and therefore this needs to be discussed with your accountant.
Q) Property: Would the Academy Trust have the freehold or leasehold interest of the land?
If the governing body currently owns the freehold interest (which is usual if you are a foundation school) then in most cases the freehold interest will transfer to the Academy Trust. In rare circumstances certain restrictions on the title may prevent the transfer of the freehold and your legal team would need to investigate the title during the due diligence process. The DfE note that it is a key concern of theirs to secure the future of the academy on the site and therefore before they make a decision whether to allow the transfer of the freehold interest to the Academy Trust, the appointed solicitors for the governing body are required to prepare a report on title. This report on title will be sent to the DfE and this report will identify all the land currently held and by whom the land is held, whether the land is freehold or leasehold and the key legal documents relating to the land.
Once the DfE has received this report they will assess the arrangements for land transfer and they will take into account the current category of the school i.e. foundation, the current arrangements which the land is held and the history of the school land. Only with the consent of the Secretary of State will the governing body be able to transfer the freehold interest to the Academy Trust. As this is a concern we would investigate this at an early stage of the conversion process
Q) What is the difference between a Member and a Governor, and their relative responsibilities?
Tollers will provide a booklet to each governor on their roles and responsibilities of being a governor of the academy. In brief, the governors are responsible for a full range of statutory responsibilities including duties imposed on directors by the Companies Act 2006 and under Charity Law as listed below. They will have responsibility for the day to day running of the academy. They directly employ staff, have direct health and safety responsibilities, arrange financial audits and decide the school's admissions policy. The members form the academy trust and the governing body will be delegated responsibility for management of the academy on behalf of the members
Charity Law duties
- Accept ultimate responsibility for the Academy Trust ensuring that it is solvent and well managed and delivering the charitable outcomes for which it was set up
- Ensure compliance with Charity Law
- Only use assets and funds in furtherance of the Academy Trust’s objects
- Consider obtaining external professional advice, if the trustees may be in breach of their duties
- Take special care when investing the funds of the Academy
Company Law duties
- A duty to act within the powers granted as set out in the articles of association
- A duty to promote the success of the Academy
- A duty to exercise independent judgement
- A duty to exercise reasonable care, skill and diligence
- A duty to avoid conflicts of interest
- A duty not to accept benefits from third parties
- A duty to declare their interests in any proposed transaction or arrangement with the Academy
The information surrounding conversion to academy is still changing and we highly recommend that you discuss the legal process of the conversion with an experienced legal advisor.
Please note that the information provided above has been obtained either from the Department for Education at the time this article was published or is contained in the funding agreement and provides generic advice only.
We would welcome an opportunity to discuss any proposed plans to convert to an academy and Matthew Crosse can be contacted on 01908 396230 or alternatively at matthew.crosse@tollers.co.uk
