Academy Trust Governors legal issues

Academy Trust legal status

The type of company set up has no share capital and is required to direct all funds received to achieving its objects (the aims of the school).  The Memorandum and Articles of Association set out the objects and composition of the Academy Trust and also defines the responsibilities of the Members and Governors. We will provide clear and concise guidance on these documents at the outset of the conversion.

As a company, the Academy Trust will be subject to Company Law and to the requirements of  Companies House. There are regular filing requirements and it may be suitable to appoint an external organisation to manage the filing requirements.

The Academy Trust is a separate legal entity and capable in its own right of entering into contracts and it is, therefore, a party to the various documents required for the operation of the Academy such as the Funding Agreement.

An Academy Trust has two groups of individuals which are involved in the corporate governance of the organisation: the Governors will be directors of the Academy Trust and they will collectively form the Governing Body, which will be delegated responsibility for management of the Academy on behalf of the Members.

The Members

Membership of the Academy Trust will usually consist of at least three Members, the Chair of Governors will always be a Member, the Secretary of State may appoint a Member and any additional Members as thought appropriate.

It is compulsory for the Members to meet on an annual basis and record the minutes of the meeting, the agenda of this meeting will include the approval the annual accounts, approval of any Governor appointments or re-appointments and reviewing the overall operation of the Academy.

The Governors

The Governors are responsible for managing the affairs of the Academy Trust and are responsible for the day to day operation of the school.  It is likely that the meetings of the Governing Body will be on a regular basis and the overall content of the meeting will be very similar to the matters discussed pre-conversion.

Most schools do not take advantage of the additional flexibility allowed as an Academy in respect of Governors and the schools existing Governors will remain unaltered after the conversion. There are some minimum requirements to the composition of the Governing Body; it must have at least two parent Governors; there must be no more than a third of Governors who are Academy staff, and there can be no more than one Local Authority Governor.

The Governors key responsibilities are:

• The daily running of the Academy and the management of the Academy’s business affairs;
• Ensuring the provision of quality education at the Academy
• Monitoring the performance of the Academy
• Entering into contracts on the Academy’s behalf
• Ensuring that relevant statutory documents are delivered to Companies House and the statutory books are up to date
• Managing the Academy Trust’s finances and property
• Taking part and actively contributing in board meetings of the Governors

Members and Governors are not exclusive roles. The same individual can be a Member of the Academy Trust and a Governor.

Company Law Responsibilities

Governors will be registered as directors of the Academy Trust at the Registrar of Companies and must be aware of and work within the following recently codified duties under the Companies Act 2006:

• A duty to act within the powers granted by the Memorandum and Articles of Association and only exercise the powers for the purpose for which they are conferred
• A duty to promote the success of the Academy
• A duty to exercise independent judgment
• 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 an interest in any proposed transaction or arrangement with the Academy

Other legislation which the Governors need to be mindful of include Insolvency Act 1986, Health and Safety at Work etc Act 1974, Environmental legislation, Freedom of Information Act and The Company Directors Disqualification Act 1986.

Charity Law Responsibilities

The Academy will have charitable status and it will need to comply with the regulations set by the Charities Commission. The Governors are responsible for ensuring that the Academy Trust adheres to these regulations and the individual Governors have similar duties under Charity Law as those addressed above but in addition they must:

• 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 and deliver necessary reports and returns as required
• Only use assets and funds in furtherance of the Academy Trust’s objects
• Consider obtaining external professional advice, if the Governors may be in breach of their duties
• Take special care when investing the funds of the Academy

Liabilities

As a limited company, the starting point is that the Academy Trust is the entity which enters into contracts, can sue third parties and may be sued and holds the title to the various assets of the Academy. The Academy Trust can be held criminally and civilly liable for regulatory breaches, including breach of Health and Safety at Work etc Act 1974 and others to include Corporate Manslaughter and Corporate Homicide Act 2007.

The liability of the Members will be limited to contributing the nominal sum of £10 on dissolution of the Academy Trust as detailed in the Articles of Association. This would only be called upon if the Academy’s assets did not cover all of the debts of the Academy Trust on it being wound up. This is very unlikely to occur as the Academy can not operate with a financial deficit and the YPLA (Young People’s Learning Agency) monitors the financial stability of the Academy Trust.

The liability of Governors is limited as they cannot be personally held responsible for the debts of the Academy Trust that have been properly incurred. They can become personally liable if they act in breach of their duties and/or statutory/regulatory obligations. However, the circumstances in which payment would actually need to be made are very limited.  The Model Articles of Association for the Academy Trust allow the Trust the option to take out insurance to protect Governors if the Governors sought such reassurance”.

It is recommended that Governors are fully briefed on their legal obligations and liabilities as well as being offered appropriate training to fulfill their tasks before their appointment. In addition, they should familiarise themselves with the governing documents.