There are over 4000 schools which are now academies. This number is set to increase, especially if the new Education and Adoption Bill goes through. Academies are governed by their governing boards or boards of directors. Over the past few months I have come to realise that there is a great deal of confusion over the various terms which are used when we talk about academy governance. This confusion exists amongst the public in general, governors of maintained schools and, more worryingly, amongst some governors of academies. Here is my attempt to try and explain some of these terms in plain English.
Company limited by guarantee
Academies are companies limited by guarantee. When the school converts to academy status it becomes a company which is a legal entity. The company becomes liable for debts. If the academy was not a limited company then the people responsible for the running of the academy would become personally liable for its unpaid debts if something were to happen which meant that the academy could not meet its liabilities (staff pay, equipment on lease, etc). As academies are limited by guarantee companies, the liability is limited to the amount set out in the Articles, which is typically a nominal sum (£1.00-£10.00). In other words if the academy were to close its doors then the Members will only pay the amount specified in the Articles.
Companies limited by shares are owned by shareholders who are paid dividends from the profit of the company. A company limited by guarantee, such as an academy, has no shareholders. It has, instead Members.
What do Members do?
Members do not run the company (the academy); they appoint (and can remove) some of the Directors (governors) who do so on their behalf. Members have the power to amend Articles (depending upon the version of the Articles, they may need to seek approval from the Secretary of State to do so). Members can hold general meetings but they do not have to do so. They can do most of what they need to do via written resolutions or special resolutions (written resolutions will need a majority to vote in favour in order to be carried and special resolutions need 75% votes in favour to be carried). Members hold one Annual General Meeting (AGM) where the accounts are presented. Members hold the Board of Directors to account.
When a school converts to academy status the persons signing the Memorandum of Association become the first Members. There must be at least three signatories but DfE recommends that there be at least five. Under the latest version of the model articles an employee of the Academy cannot be a Member. This means that the Head cannot be a Member now.
Maintained schools are governed by governing bodies and people sitting on these bodies are called governors. Academies are governed by their Board of Directors. They perform the same statutory functions (as outlined in the Governors’ Handbook) as maintained school governors and therefore they can be called governors. As academies are companies the persons responsible for the running of the company are Directors for the purposes of Company Law. Academies are also charities and people who govern charities are trustees for the purposes of Charity Law. So, people sitting on academy boards of directors can be referred to as Directors/Trustees/Governors. It is imperative that people sitting on the academy boards understand that they have duties placed upon them as governors as well as duties placed upon them by Company Law as Directors and by Charity Law as trustees. Not understanding this can have serious consequences as people may be breaching Company Law or Charity Law without knowing that they are. (A complication arises with MAT’s as people serving on local governing bodies of MAT’s are not governors in the true, legal sense. See here and here for more details).
What do Directors do?
The Board of Directors are responsible for governing the academy and making sure it meets its objectives. The core statutory duties are explained in the Governors’ handbook and are
- Ensuring clarity of vision, ethos and strategic direction
- Holding the head to account
- Ensuring the financial health of the school
The Board of Directors is a corporate body and the powers that the Directors have are that of the collective body. Directors have no individual powers unless they have been conferred on them by the Board.
The above can be summarised as below.
Thankyou to Katie Paxton-Dogget for her suggestions and Steve Penny for help with the graphics.
Update: 16 March 2016 George Osbourne, in his budget speech, announced that all schools were to become academies by 2020. This led to people claiming education was being privatised and that thus spelt the end of comprehensive education. Laura McInerney wrote a very informative piece on “What is an academy” where she answered this and other questions.