Knowing how to avoid influenced company status matters

There was a fascinating discussion on Twitter the other day regarding Local Authority Associated Person (LAAP) and Governing Boards of academies. As this restriction on memberships of Governing Boards is not very well known, I thought I should blog the highlights.

Definition of LAAP

A Local authority associated person is defined in the Local Government and Housing Act 1989 Section 69 as follows.

For the purposes of this section, a person is at any time associated with a local authority if—

(a) he is at that time a member of the authority;

(b) he is at that time an officer of the authority;

(c) he is at that time both an employee and either a director, manager, secretary or other similar officer of a company which is under the control of the authority; or

(d) at any time within the preceding four years he has been associated with the authority by virtue of paragraph (a) above.

The definition of a local authority is a very wide one. Section 67(3) of the Local Government and Housing Act 1989 defines a local authority to include District councils, county councils, London Borough councils, parish councils and community councils.

Reason for the restriction

The whole idea behind schools converting to academy status was to allow schools to be free of local authority control. It therefore follows that processes had to be put in place so LAAP do not gain control of Boards. This has been done by restricting the number of LAAP that a Board can have at any given time. The maximum aggregate number of votes exercisable by LAAP cannot exceed 19.9%. As soon as it exceeds 19.9% then the person who took it over the limit is deemed to have resigned. In legal terms this means that it is not up to the Governor to decide whether or he/she resigns. The resignation is considered to have happened as soon as the limit was exceeded. The rules also state that any LAAP thinking of joining a board needs to seek approval of his LA before he/she can be appointed.

Implications of this restriction

1. This restriction applies to both Directors and Members.

2. When Directors or Members are appointed steps need to be taken to ensure that the votes exercisable by LAAP’s remain below 20% at all times.

3. The person seeking to be appointed to a Board needs to seek permission from the LA he/she is associated with.

4. Boards cannot stop anyone from putting their names forward during parent governor elections. However, if the person polling the most votes is an LAAP and the appointment of this person will take the LAAP share of votes to above 19.9% then that person cannot be appointed as a parent governor.

5. When considering if a person is a LAAP, the Board has to see whether the person is associated with a local authority as described in section 69 of the Local Government and Housing Act. As you can see from the above it is quite a wide definition and it does not matter which authority the person is associated with. In other words, the percentage can be made up of LAAPs who are all associated with different LAs and ones which the school would  not normally have any connection or dealing with – they will all still count.

6. If at any stage the number of LAAP exceed 19.9% then sufficient number of LAAP are deemed to have resigned to bring the number below 19.9%. Resignations are on the basis of last in, first out. In other words the persons appointed last are deemed to be the first to have resigned.

7. A fascinating scenario would arise if there were, for example, two parent governor vacancies. The two who are elected are both LAAP and the way the numbers work out having both of them on the Board would mean LAAP are 20% of the total which cannot be allowed. In this case I think the first past the post rule may have to apply. In other words the first person of the two to get enough votes is appointed to the board and the second person is effectively out of the process.

What are the consequences of an Academy becoming an influenced company?

If an Academy were to become an influenced company it would have to undertake various additional tasks such as

  • Change its stationery to reflect the fact that it is an influenced company
  • It will need to remove any director who is barred from becoming a member of a local authority
  • It may need to provide information to the local authority auditors
  • It will not be able to publish anything which can affect public support for a political party
  • It may need to provide information to councillors
  • It will have to seek the Audit Commission’s consent before appointing auditors
  • It may face problems with DfE/EFA

It is, therefore, vital that Academies take all necessary steps to avoid becoming an influenced company.

P.S. Thank you to Katie Paxton-Dogget, Matt Lake and Shena Lewington for the fascinating twitter discussion and to Katie for reading and commenting on this before it went “live”.

5 thoughts on “Knowing how to avoid influenced company status matters

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