Browne Jacobson - Education Law Conference 2016 - Workshop stream 1, Efficient and effective MATs

Workshop M1Managing an effective due diligence process

The education law conference 2016

#BJEDC16

Heads of Terms?

Timescales

Final accounting processes – eg how to deal with trust-wide capital receipts, reserves, cash, creditors & liabilities

Approach to due diligence, warranties & indemnities

Practical issues to consider (1)

Disclosure of information

TUPE – need to take measures?

Trust winding-up? • Liabilities• MAT academies going to 2 or more MATS = added

complexities• Accounts to EFA• Striking-off/voluntary winding-up

100 day plan?

Practical issues to consider (2)

Managing risk: the due diligence processTwo key purposes:• primary purpose is to obtain sufficient information about the

organisation joining the MAT in order to decide whether the transfer should go ahead

• where appropriate, any information revealed can be used to provide a better negotiating position in respect of the terms of the transfer

Timescales to undertake the due diligence and produce a report will be increasingly tight but very important that a certain level of due diligence is always carried out Organised, planned process critical

Process of due diligenceA multi-disciplinary teamRobust and rigorous process But a sensitive exercise as the due diligence work required engaging with the school’s staff and governors in order to obtain the necessary information and make the judgements required while at the same time allaying any concerns about the implications of becoming a part of the MAT or a sponsored academy.

Key due diligence tests

• Financial• Organisational• Performance Data• Legal• Commercial

Financial due diligenceAs a minimum due diligence would normally involve obtaining a full understanding of:

Also assess the finance capability at joining schoolAdvisable to commission an independent audit of finance and risk

• 3-5 year budget plans • Last 18 months CFR submissions

• Audit reports • Insurance claims in last three years

• Cashflows • Carry forward/deficit• Loans • Devolved capital balance• Finance Agreements • School funds • Last three years set of

accounts

Organisational due diligence (1)A full report on the implications of the HR and staffing issues, in particular in terms of the TUPE arrangements that would apply to include:• list of employees and T & C’s• staffing structure including summary biographies of

SLT • any ongoing/unresolved staffing issues, employees

undergoing capability procedures, compromise agreements

• pay policy including any safeguarded pay issues• single status implementation• pension actuary figure• curriculum model and staffing ratios

Organisational due diligence (2)

• Be aware that in employment terms formal paper based due diligence has limitations

• Look at practice and effectiveness, not just data and statistics

• What are the ‘people’ implications of what the finance due diligence is telling you? – does the curriculum need to change, class sizes need to be bigger, is the staffing structure fit for purpose, what cultural issues are there

• Advisable to have specialist HR advice

Organisational due diligence (3)HR checklist1. Consider whether ‘measures’ are needed as part of TUPE to allow

you to align policies or practice post transfer?2. Do you understand processes, T & Cs and systems in all the

schools before they join?3. If different T & C’s and even pay scales for support staff, what is

the plan to harmonise?4. Do you have one HR provider across the group to secure

consistency and minimise risk? Is this one of the non-negotiables when a school joins?

5. Do your legal team negotiate indemnities where possible? You will need to identify issues for this to happen?

6. Particularly if in year deficit, does the LA or current employer need to restructure or exit any staff before transfer?

Organisational due diligence (4)Quality of Governance

• Can chair adapt to role on LGB and be interface with Directors.

• How will scheme of delegation be applied to this new joiner?

• What level of central support will the LGB require and how will this be reflected in top slice?

Performance due diligence

External data is accessible but advisable to familiarise yourself with the extent of the education challenges the school or academy currently faces to raise standards and accelerate improvement by reviewing the school’s own data.Will help you assess the MATs capacity to support the school and how this particular school fits into the portfolio of schools in your MAT

Legal due diligence (1)

Important to ensure that all assets and contracts including the title to the school land are effectively transferred to the MATAlso to understand any liabilities which may be associated with these assets so that MAT can manage any risks identified with aim to reduce liabilities before transfer

Legal due diligence (2)As third parties without any prior knowledge of a particular school site, a MAT may want to carry out the kind of due diligence that a commercial enterprise would normally carry out when considering acquiring an interest in landEnables MAT to bring the new school on board with its ‘eyes open’ to the matters and issues affecting the site

• Title investigation• Searches – local search, highways search, environmental

desktop search, flood risk search, chancel repair search, water and drainage search

• Standard enquiries of landownerIf the site is one where development is contemplated, additionally advisable to carry out utilities searches so can understand how presence of gas, water, electricity, telecommunications might impact upon development plans

Commercial diligence Review contracts and identify opportunities for economies of scale e.g. Leases, SLAs, licences, services to other organisations, payroll provider, IT provider, HR provider, utilities provider, legal services providerTo include understanding all arrangements currently implemented by the LA on behalf of the GBAlso important to understand any additional contracts which will need to be entered into in order to continue to properly operate based on growth in MAT (e.g. upgraded finance system)

Due diligence report

Draw together multi disciplinary findings into a single coherent report of findings and recommendations to inform the board in their final decision about whether to proceedImportant to consider the findings in context of the MAT’s growth strategy and visionEnsure there is an effective feedback loop so that constantly refining and rebalancing approach to due diligence to meet MATs needs

Top tips

• Planning is key• Start as you mean to go on• Bring together in one coherent report and

test against your strategy• Tailor to circumstances• Learn the lessons

www.education-advisors.com

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The information contained in these notes is based on the position at February 2016. It does, of course, only represent a summary of the subject matter covered and is not intended to be a substitute for detailed advice. If you would like to discuss any of the matters covered in further detail, our team would be happy to do so.

© Browne Jacobson LLP 2016. Browne Jacobson LLP is a limited liability partnership.

Mark Blois | +44 (0)115 976 [email protected]

Nick MacKenzie | +44 (0)121 237 [email protected]

Workshop M2 Managing academy transfers between trusts


#BJEDC16

What is an academy transfer? Different types

• Single academy transferring to a MAT• Whole MATs transferring to another MAT• A struggling academy within a MAT transferring to

another MAT• A struggling single academy transferring to a

sponsor MAT• A MAT group dividing into separate MATs

Why does an academy transfer take place? • A breakdown in the shared vision/cultural

fit• A need for sustainability• Benefits of collaboration through shared

governance• Poor performance• A new direction

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Who brings an academy transfer about? • RSC – in the South West approximately 60% of his

time is spent monitoring the performance of existing academies

“ We do not tolerate failure and the strength of the academies programme is that it allows us to intervene swiftly, including replacing sponsors where it is in the best interests of the School. We will not apologise for taking decisive action where needed”

DfE Spokesperson

Who brings an academy transfer about? • RSCs looking to broker relationships and

plan for each region’s development and its needs

• Academies themselves; where a mismatch is recognised

• Academies themselves; where they recognise a strategic imperative

What does it cost to make an academy transfer?• As at February 2016, the range of re-

brokering costs for struggling schools is £0 - £534,000

• The average cost of 23 re-brokered schools was £131,000

• The monies are payable for additional school improvement, CPD, business management support, deficit funding, building maintenance

How many academy transfers are taking place? • Up to August 2015 Department for

Education has ordered 104 re-broker transactions

• This doesn’t include the ‘academy converter’ transfers

• Increasing numbers due to the growth of MATs

If you are thinking of moving…

Significant change procedure

• Affects all existing academies• Requires consent of Regional School

Commissioner through Head Teacher’s Board

• Each application considered on a case by case basis

• Unlikely to approve cross MATs transfer to transfer without good reason

Intervention

Where the Regional School Commission has concerns, range of actions including:• Pre-warning notice letter to the directors• Warning notice letter additional

director working with strong MAT Re-brokerage

As a single academy transferring to a MAT

• Corporate and funding elements only

• Land, commercial and employment matters are unchanged

Existing academies converting to a MAT

• consultation• business case

• amending Articles of Association• changes to composition of members and trustees

• deed of variation• master and supplemental funding agreements

• identifying and investigating potential partner schools

• bank accounts• finance software

Significant change

Governance

Funding Agreement

Due diligence

Infrastructure

Who joins who?

• Identify the academy with the most complicated issues (land, commercial contracts etc.)

• Use the most complicated trust as the MAT and transfer other trusts into it

As a single academy transferring to a sponsor MATCorporate • Governance transfers to the new MAT• The transferring academy trust remains in

existence for approximately six months (with three members and three directors) to ensure any residual matters can be picked up and not lost – and is then closed down

• The ‘old’ governors may form part of the new MAT governance (Board or LGB)

As a single academy transferring to a sponsor MATEmployment• Staff are TUPE’d across to the new MAT. Considerations are whether there are any measures, consultation required etc. – same process as original conversion

As a single academy transferring to a sponsor MATProperty• Prior to the dissolving of the existing academy

trust property will need to be transferred to the new MAT. This constitutes a ‘disposal’ under Schedule 1 of the Academies Act 2010 and the Funding Agreement and therefore requires consent to dispose of publicly funded land. Consent is obtained either through the consent to the change in status or through a separate Form A via the EFA.

As a single academy transferring to a sponsor MATProperty• Freehold property is transferred by a Deed• Leasehold land is transferred as an assignment. A

Licence to Assign is needed from the current landlord.

• Any 3rd party leases will need to be assigned as well.

As a single academy transferring to a sponsor MATCommercial• All the commercial assets of the transferring

academy will need to be transferred to the new MAT. A Commercial Transfer Agreement is required which will set out any assets that are being disposed of together with any warranties or indemnities that are appropriate

The outgoing directors may not wish to give any residual warranties or indemnities as the company will cease to exist in due course. Indemnities would be worthless to the new MAT.

As a single academy transferring to a sponsor MATFunding• The existing Funding Agreement will need to be

varied to become a Supplemental Funding Agreement and it will need to be novated to the new MAT. The MAT will hold a Master Funding Agreement which replaces the existing Funding Agreement

As a whole MAT transferring to another MAT

Corporate• The whole governing body will cease to exist and

the company will dissolve. There is no need to maintain the company unless you want to use it as a subsidiary for some other purpose

As a whole MAT transferring to another MAT

Employment• Staff are TUPE’d from existing trust to the new

MATProperty• As before, consent required and disposals take

place for each schoolCTA• As before, for each schoolFunding• As before, for each school

As a struggling academy within a MATCorporate• The existing corporate entity will continue to

exist. If existing governors are going to join the new board, they will resign from the existing one (unless they don’t want to) and (if appropriate) join the new one on the board or the LGB

Employment• Staff are TUPE’d from existing trust to MATProperty• As before

As a struggling academy within a MAT

CTA• As before, but the negotiations between the

existing AT and the new AT may be more ‘commercial’ depending on what has been found through due diligence. The existing MAT will want to divest liabilities and risks. The new MAT will want to limit the liabilities and risks it takes on. Where a school is struggling this is more likely to be the possible scenario

Funding• As before

As a dividing group

If the consent of the RSC is obtained thenCorporate• New MAT will need to be established for those

transferringFunding• New Master Funding Agreement and probably

new (as opposed to novated) Supplemental Funding Agreements required

As a dividing group

Employment• TUPE of staff into new entityProperty• Transfers and assignments requiredCTA• Negotiations comparable to the struggling

academy within a MAT

Church school transfers

• Need to liaise early with the Diocese re governance arrangements and get agreement

• Church Supplemental Agreements will need to be novated to the new MAT

Liabilities of outgoing Directors

• Directors need to make sure they have carefully considered what liabilities if any will remain with the trust. This will include considering the extent of any warranties and indemnities that are to be provided on transfer.

• Insurance on an annual basis can be obtained from some insurers for claims post dissolution.

Any Questions?/Discussion

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Julia Green | +44 (0)1392 45 [email protected]

Jamie Otter | +44 (0)161 300 [email protected]


Workshop M3 Making the most of your MAT


#BJEDC16

Governance and decision makingLessons learnt from Ofsted focussed inspectionsManaging risk

Session overview

Academy 1

multi-academy trusts

LGB

SchoolLevel

Board of DirectorsTrust level

Members

Academy 2

Academy 3

Academy 4

LGBLGBLGB

Members – appoint &

remove directors

Board of Directors –

approve accounts, MFA, employ staff, hold land &

overall responsibility

Academy - SFA, oversight of educational standards at

local level

Approach to delegation

Main Board

Strategic oversight, setting visions and policies for the trust, governance, contractual relationships with third parties

LGB

Day to day running of the academy, carrying out the trust’s vision, policies and priorities, holding academy leadership to account

delegation linked to OFSTED

hybrid approach

full delegation for

all

or systematic delegation?

delegation linked to OFSTED

full delegation for

all

Approaching committees in a MAT?

Delegation•same delegation between LGB’s/academy councils?•restrict sub-committees?•shared committees?•meeting protocols?

Clerk & Process

•common clerk?•governance manager?•common format for paperwork?•frequency of meetings?

Linking board to local boards …

people

• segregation of people

• right people right place

• link governors

• management team

document

s

• scheme of delegation

• expectations & entitlements

• codes of conduct

process

• reporting

• meeting timetabling

• review of effectiveness

links

Leadership models – Exec Head, pure model

Executive Head/ Principal

Head of SchoolSchool A

Head of SchoolSchool B

Head of SchoolSchool C

Leadership models – Exec head, mixed model

Executive Head/ Principal

HeadteacherSchool A

HeadteacherSchool B

HeadteacherSchool C

Leadership models – CEO model

CEO

Headteacher

School A

Headteacher

School B

Headteacher

School C

Headteacher

School D

Headteacher

School E

Accountability

Accountability of the executive 16. How well does the Trustee Board understand its academies’

performance data, & how do Trustees know that pupils in all their academies are making the best progress they can?

17. What mechanisms does the Trustee Board use to ensure there is a strong and effective executive leadership structure and personnel in place across the Trust with the right skills, clear line-management and reporting mechanisms?

20. Do the compliance systems give assurance to the Trustee Board that the Trust is meeting its statutory and legal responsibilities?

Taken from 21 key questions for MATs document available from the NGA & APPG on Education Governance and Leadership

How do we…

Approach delegation from the board to the local GBs and effectively link their work? How does this interact with the executive team?

Legal basisProcess Key areas of focus

Ofsted focussed inspections

Key areas of focus

• what progress have the MATs academies made?• the achievement of pupils (particularly

disadvantaged pupils)• how does the MAT collect and review data about

its academies’ performance?• how does the MAT review the performance of its

academies at an academy by academy level?

Key areas of focus (cont’d)

• how does the MAT use the information it collects to deploy resources, support and training across the MAT?

• the effectiveness of the MATs leadership model and its leaders?

• the effectiveness of the MATs model of governance and its link to securing progress and achievement?

• how realistic the leadership’s assessment of the MAT’s current position is (strengths & weaknesses) and how well this informs the MAT’s strategic plan?

How do we…

Manage risk across the MAT?

Risk register – how many & ownership?Finance - Audit & Risk Committee Education - ? Approach to risk – avoid, mitigate & target risk

Managing risk

Single employer as a MATInconsistency – no. 1 riskEqual payDiscriminationLack of clarity on delegation means confusion and either indecision or bad decisionsT&Cs – harmonise or not?

Specific risks - employment

Talk to us…

Name | +44 (0)[email protected]

Please note



Julia Green | +44 (0)1392 45 [email protected]

Jamie Otter | +44 (0)161 300 [email protected]

Adrian Shardlow | +44 (0)115 976 [email protected]


Browne Jacobson - Education Law Conference 2016 - Workshop stream 1, Efficient and effective MATs

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Transcript of Browne Jacobson - Education Law Conference 2016 - Workshop stream 1, Efficient and effective MATs