Look before your leap
 Conversion to academy status is a major step, with a significant number of practical and legal factors to take into account. Stephen Ravenscroft, partner at education law firm Stone King LLP, gives his top ten legal considerations for schools converting to academy status.
1. Land
As a school converts to an academy, details of the land transfer arrangements need to be addressed. The process and complexity differs depending on the type and situation of the converting school:
- Community schools will receive a long (125 year) lease from their Local Authority (LA) and this will require discussions and negotiations with the LA;
- Foundation schools should receive the freehold of their land, but some have land which is held subject to separate charitable trusts and this can lead to the need to investigate those trusts and possibly make changes to ensure that they are fit for purpose;
- Schools sharing facilities (i.e. use of a community leisure centre or two schools using the same site) may require a dual use agreement, and;
- Diocesan schools on land owned by the diocese need to agree how the academy will use the land and what land interests the diocese will wish to retain.
It is strongly advised not only to seek expert advice but also to engage with the LA the trust or diocese as early as possible.
2. Buildings
Land agreements naturally involve the school’s buildings. Therefore, the condition and maintenance of all buildings should be reviewed independently, ensuring that on handover they are fit for purpose. Issues that need addressing early in the process include the following:
- PFI schools will need to enter into bespoke agreements to ensure that the academy is able to buy into the PFI scheme following conversion – the additional time required for this can be minimised with careful planning and early discussions with the Local Authority;
- Non-PFI schools may also have recently completed building works and will need to negotiate to transfer the benefits of warranties on these works, and;
- The LA is required to hand over a building which is fully operational and meets Health and Safety guidelines (e.g. asbestos and fire safety issues).
3. Consultation
Schools choosing to become an academy are required to undertake a consultation process. While there is no formal guidance regarding the length and content of any such process, we would typically advise that 4-6 term-time weeks should be spent on the consultation and that it should involve all key stakeholders to ensure that it is appropriate and effective. Identifying and engaging with stakeholders early allows for a smoother transition. It is important to understand the level of consultation required for your school’s specific situation and that it is effectively planned and implemented.
4. The TUPE process
Staff are required to have their employment transferred from the school to the academy through the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) – a central part of any conversion process. An effective TUPE process is a ‘must’ and although complex, it can be relatively straightforward if managed effectively. Specialist TUPE advisers can guide the school through the technicalities of the process and ensure all parties are fully engaged.
5. Commercial transfer agreements
All academies will require a Commercial Transfer Agreement (CTA) which sets out how the predecessor school’s assets and liabilities should be disposed of:
- A community school will require the CTA to be drawn up with the LA. This can be complex, depending on the position the LA takes regarding the academy’s pre-conversion liabilities. Early engagement with the local authority is important; and
- A Foundation or Voluntary Aided school may not need to work with the LA on the CTA, but should certainly keep them informed.
6. Governance
An academy’s governing board differs from that of a school in the level of responsibility and commitment required. The conversion period is often an opportune time to consider the size and structure of the governing board. Many undertake a skills audit to ensure that the academy has the right level of expertise and experience going forward. A review of training needs for academy governors should also be undertaken.
7. Finance
Schools should ensure they have the right level of expertise not only to manage the academy’s finances post-conversion, but also to take the school through the conversion process. The financial requirements placed on academies can be a significant leap for some converter schools, and a review of existing financial capacity and expertise should be conducted. Such financial considerations include:
- Audit of Financial Statements – an academy is both a company and a charity and is required to produce financial statements under the Companies and Charities Acts, which will need to be audited by an external auditor;
- Business plans – thorough planning is a necessity to ensure all elements of running an academy from a business perspective are considered;
- Bought-in services – academies should review what the local authority provides and consider whether they are required, and represent value for money;
- Accurate costing of any additional outgoings and purchasing required e.g. asset valuations;
- Procurement of insurances which will include building, land, contents, directors’ and officers’ insurance;
- Pensions – academies need to ensure that all staff pensions are transferred. In addition, support staff pension contributions may need to be reassessed to reflect the age and risk profile of academy staff, which could possibly lead to an increase in rates;
- Novation of contracts from school to the academy – fees sometimes apply with contract transfers (such as photocopiers);
- Finance systems – current school systems will need adapting or replacing. It is crucial to choose the right system for the academy and there are many options on the market. Take the time to look around and get the best option for the academy at the best price;
- VAT requirements and other tax implications.
8. Federations and cluster groups
Some schools that may be considering converting may look to join an existing academy, a local multi-academy trust or connecting with a group of local schools to form a cluster group. Cluster groups may be more appropriate for primary schools that may be too small to access potential benefits of becoming an academy, but through a cluster could benefit not only from sharing best practice but also by securing economies of scale for a variety of services.
9. Preparation and due diligence
Prior to the conversion process a crucial preliminary task is to undertake due diligence and compile all the necessary information about the school to enable it to become an academy. This includes:
- Identifying outstanding health and safety risks;
- Up to date budgets;
- Clear explanation of the school’s banking practices e.g. a register of all accounts, and;
- Early understanding of staff issues, such as staff shared with another school.
It is essential to gather as much information as possible in advance as this will ease the school’s conversion and enable any experts brought in to fully immerse themselves in the school and its workings and also to identify any issues or anomalies which could derail the conversion.
10. Consult and seek advice
Conversion to an academy can be a significant task, and invariably requires a great deal of commitment from the Headteacher/Principal, business manager, governors and other stakeholders. Schools considering converting should think about speaking to other local academies and seeking specialist advice where appropriate.
IN:TUITION was speaking to Stephen Ravenscroft, partner at education law firm Stone King LLP
For more information on any of the articles or to find out more about what PKF can do for your academy please contact the PKF academies team on 0207 065 0377 or email education@uk.pkf.com
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