This is Section 25 of the Guide to the Law, as published May 2012.
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This section gives details of how, in certain circumstances, governing bodies of maintained schools can form school companies, or take part in forming school companies with other governing bodies and/or prescribed third parties. It explains the roles and responsibilities of governing bodies in these circumstances.
1. Sections 11 and 12 of the Education Act 2002 enable the governing bodies of maintained schools to, either independently or with other governing bodies and/or prescribed third parties, form companies to undertake certain specified activities. Doing so enables schools to purchase goods and services collectively, to provide services or facilities to other schools, or to exercise functions which a Local Authority (LA) is able to contract out. The Act also gives governing bodies the power to invest in, or become a member of, such companies.
2. Use of these powers is optional. An example of where a governing body might wish to use the power to form a school company is where it judges that a joint vehicle with other schools would facilitate collective activity.
3. The existence of a company enables individual school governing bodies to enter into contracts as a group and to pool resources effectively without being part of a formal structural collaboration such as a federation. Schools are able to follow a well-established procedure for forming a company and have considerable flexibility in how the company is run.
4. Where a company is formed, the governing body remains responsible for the running of the school: a school and a company are separate legal entities. It follows that if the company gets into financial trouble, there will be no risk to the school’s assets or the employment of the school’s staff. Teachers will not be expected to transfer to the company.
5. Governing bodies must have the consent of their LAs to form or join a company, but this can only be refused on certain specified grounds relating to the school’s performance or financial management. Each company will have a supervising authority (a local authority) to ensure that the company is run on a sound financial footing.
6. School companies can make a profit. The articles of the company must state whether profits may be distributed to its members according to procedures set out in the articles and/or to further the aims of the company.
WHAT LEGISLATION DOES THIS REFER TO?
The School Companies Regulations 2002: SI 2002/2978
The School Companies (Private Finance Initiative Companies) Regulations 2002: SI 2002/3177, for companies where the purpose is to enter into or facilitate private finance initiative (PFI) agreements.