Independent schools seminar

       9 February 2010
Governors’ duties - what you need to
               know
        Adrian Pashley, senior solicitor
         Charities and E...
Duties & responsibilities of Governors

Key duty: advance purposes of charity

  Responsible for proper administration of ...
Case study – St Peters Independent School

Charity Commission Investigation

  Headmaster - allegations of physical harm
 ...
The Governors’ response


  No action against Head - allegations unfounded and
  malicious
  Ignored advice of agencies to...
No….Commission found

 Governors failed to discharge their duty to act in the best interest of the
 School, its pupils, st...
Intervention by the Commission

 Initial investigation - misleading information given

 Formal inquiry

 1st direction for...
Governance Review


 Delegation (policies and procedures)
 Procedures to ensure Governors engaged in the
 supervision of t...
The lessons

 Governors responsible for overall management of the
 administration of the School
  – Act as a team, collect...
The lessons (cont…)

 Pay particular attention to the inherent risks
 associated with the work
 React quickly and responsi...
The lessons (cont….)

 Manage complaints - openly and transparently under
 a procedure

 Report serious incidents
 - signi...
Conclusion

 Governors must be familiar with what their role
 entails by way of governance and the management
 of operatio...
Adrian Pashley
senior solicitor, Charities and Education team
 New Kings Court, Tollgate, Chandlers Ford,
              Ea...
AFFORDABILITY

 In 1980 average school fees were equivalent to 22%
 of median salary

 In 2010 average school fees are equ...
AVOIDING NASTY SURPRISES
            Strategy versus Tactics


This means that independent schools are now 60%
       ‘mor...
Pupil Numbers
 Are numbers down throughout the school?
 Is there an inverted pyramid?
 Are enrolments dropping?
 Are there...
Facilities
  Are you able to fully provide for current curriculum?
  Are parents asking for facilities you are not able to...
Competition

 Is there a new school in the area- this could be a
 State school or Academy?
 Has a local State school marke...
Public Relations
 Has your school suffered recently from ‘Bad’ PR such as a food
 poisoning incident, bulling, child moles...
Strategic

  Have you been approached recently by another
  school/group proposing a takeover or merger?
  Are you conside...
Governance

 Are you able to recruit Governors with the right skills
 or standing?
 Has there been a falling out between G...
Financial
  Has expenditure (including Capex) exceeded income for some time?
  Hve you been ‘forced’ to sell-off land or c...
Staffing
  Does expenditure on salaries (including add-ons) exceed 60% of your
  general fee income?
  Are you suffering f...
Key Tasks
 Check through Key Indicators to review current standing
 Anticipate what might happen when you are in the ‘good...
Final Thought

DO NOT BE AFRAID TO CHALLENGE
 THE: ORTHODOXIES AND “MYTHS”
 WHICH CURRENTLY DRIVE THE
 SCHOOL
isbi schools
      helping parents find schools • helping schools find pupils
     www.isbi.com schools • schools@isbi.com...
Future options: school mergers and buy 
                  outs
    Peter Story, Consultant with isbi educational consultan...
Mergers and buy outs
   The main objective of a merger or buy out is to improve the business
   The customers (the parents...
The buy out
  The proprietor of the school had had enough and it was probably 
making a loss.  
   He wanted out, but with...
The merger
   We started discussions three years before it took place. But talks fell 
through as 
   the senior partner i...
The merger, continued...
   As a result negotiations were hasty, with concessions on both sides and 
key 
   decisions (st...
Future options: sales and mergers
   Pat Carter, Chairman of National SchoolTransfer and isbi schools

www.nationalschoolt...
School closures – 2009 and 2010

In 2009 school closures were prominently reported in the media
Yet, as the ISC noted, act...
However, all is not lost

NST’s experience suggests three key messages: 

  Schools do not have to close IF trustees/owner...
Charities CAN merge and transfer


  A charity’s assets – the school – can be sold 
  The proceeds are then used to meet t...
Competition – charitable trusts and proprietorial


  Charitable schools swim in the same waters as proprietorial
  But in...
Planning and confidentiality are crucial in mergers and transfers

   Proprietorial schools can merge and transfer with gr...
School transfer... retention, cost and confidentiality


  The majority of 90+ schools NST has merged/transferred in 18 
y...
Public Benefit


  Joss Saunders, partner
Charities and Education team
  E: joss.saunders@bllaw.co.uk
        T: 07711 443...
Revision
 Removal of presumption of benefit

 There must be an identifiable benefit or benefits
  –   be clear what the be...
7 pointers to pass the test

 Allocate responsibility

 Understand the requirement

 Assess the benefit

 Keep records

 R...
Allocate responsibility

  Usually a governor

  Clear Terms of Reference

  Report to Governing Body, who carry the
  res...
Understand the requirement

 Knowledge base

 Charity Commission guidance
  – general
  – on education
  – on fee charging...
Assess the school’s public benefit delivery


  Legal purposes
  Fees
  Bursaries
  Community involvement
  Other outreach
What do your objects say: between a rock and a
hard place
  To advance the education of the pupils of the school

  To pro...
Keep records

 Keeping minutes
 Assembling statistics
 Successes and failures
 Admissions and rejections
 Applications for...
Reporting: making the case

 Charity Commission – Alltown example
 Review
 Publicly available
 Accessible by parents
Make adjustments

 Aims
 Decision making
 Financial accessibility
  – fee setting
  – bursary fund and fundraising
 New pr...
9 Pitfalls to avoid

  Lack of governor buy-in
  Not understanding the real meaning of the objects
  Tokenism
  Is the str...
What does the future hold?

 Does change of government mean change of rule?
 Litigation challenge and the guidance
 What i...
Joss Saunders
Partner, Charities and Education team
     Seacourt Tower, West Way
         Oxford OX2 0FB
       E: joss.s...
Safeguarding income in difficult times


                          9 February 2010
               James Ragg, Partner - Ch...
This recession
    Speed of onset
    Delayed impact
    Multiple effects
      – Parents’ income
      – Overall economic...
Information

     Timely budgets and projections
     Fast actual results – speed vs accuracy
     Early initiation of key...
Contribution

     Limited entry points, multiple exit points
     Short-term direct effect of recession - hopefully
     ...
Summary

      Ensure speedy reporting of results
      A guesstimate in good time outweighs certainty arriving
      too ...
Finding and Evaluating
Sources of Finance for Capital
Projects and Working Capital




                 Dorothea Dunn, Dir...
THE JOURNEY……………
Clear and Mutual Understanding of Your
Circumstances

• Downturn in economy

• Performance

• Change – Today’s risks diffe...
Homework!
• How diversified is your school’s income?

• How effective is your fundraising?

• Do you have fixed cost struc...
What To Do Next …..

• Clear Development Plan

• Awareness of Market Place

• Viability of Operation/Project

• Remain foc...
Good News!
• Funding is available for well run schools with sensible and
  conservative policies
                         ...
Banks Evaluation
What to include to give credibility to your proposition


                     Reputation/market/range of...
Relationships
• Cannot underestimate the importance of
  relationships

• One size does not fit all!

• Building a track r...
Meet The Thames Valley Team

    The Santander Group worldwide has always believed in building long
    term relationships...
66




Banco Santander S.A. and (name of company) advise that this presentation contains representations
regarding forecas...
Charitable Status
               Benefits vs. Costs

                     9 February 2010
                 Henry Briggs, S...
Charitable Status
Benefits vs. Costs



         ISC Claims for sector as a whole
         Make up 83% charitable
        ...
Hopeful Hall
  Hypothetical example

  Pupils                                200

                                       £...
Hopeful Hall


    1) Profit from Education Ltd
                                          £000’s
                         ...
4) Endowment to cover         £’000’s

     Either income from
     Angels Association        40         13
             o...
HOPEFUL HALL
  EVEN MORE PROFIT FROM EDUCATION



    Profit Motive
    Surpluses in sector more like 20% due to -


  • T...
WHAT ABOUT VAT?


     Not significantly affected by charitable status (advertising only)
     Supply of Education outside...
Charitable Status
  Benefits vs. Costs

                         Conclusions

     Should existing charities consider chan...
Charitable Status
  Benefits vs. Costs

                             Predictions

      Growth of ‘For Profit’ Schools in ...
Legal structures
        and
Independent schools

       Adrian Pashley

        senior solicitor

 Charities and Educatio...
Charitable structures

  Trust or unincorporated association
  Company – usually limited by guarantee
  Royal Charter body...
Non-charitable

 Sole trader

 Partnership

 Companies limited by shares
  – School trading companies

 Community Interest...
In more detail….

 Trust or unincorporated association
  - deed/scheme/constitution
  - Governors are the charity trustees...
In more detail….

 Company (limited by guarantee)
  – memorandum and articles
  – Governors are directors/charity trustees...
Added Comfort

 CC and court can relieve a trustee if he/she has
 ‘acted reasonably, honestly and ought fairly to be
 excu...
Trustee indemnity insurance

 Insurance against claims for breach of trust or duty
 as trustees including negligence or de...
The future?

 Charitable Incorporated Organisation (CIO)
  –   registered/regulated by Commission only
  –   model constit...
Community Interest Companies (CIC)

 Relatively new form for social enterprise
 CLS, CLG or PLC
 CIC Regulator and Regulat...
Trading subsidiaries

  Non-primary purpose trading activities
  – lettings
  – events
  Companies limited by shares
  Dir...
Current and future trends

 Mergers
  –   Ethos and culture
  –   Strategic drivers
  –   Structure
  –   Compatibility of...
Current and future trends (cont…)

 Convert to CIC?
 Sale to corporate
 Academies
  – conversion
  – lead sponsor
 Grant-g...
Adrian Pashley
senior solicitor, Charities and Education team
 New Kings Court, Tollgate, Chandlers Ford,
              Ea...
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Independent Schools seminar

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The Independent Schools Magazine held a seminar at Blake Lapthorn solicitors offices in Oxford with its education team.

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Transcript of "Independent Schools seminar"

  1. 1. Independent schools seminar 9 February 2010
  2. 2. Governors’ duties - what you need to know Adrian Pashley, senior solicitor Charities and Education team E: adrian.pashley@bllaw.co.uk T: 023 8085 7004
  3. 3. Duties & responsibilities of Governors Key duty: advance purposes of charity Responsible for proper administration of charity Ultimately responsible for everything charity does Act reasonably and prudently Safeguard and protect assets Act collectively Act in best interests of charity Avoid conflicts of interest
  4. 4. Case study – St Peters Independent School Charity Commission Investigation Headmaster - allegations of physical harm Failing educational, welfare and organisational standards Failure to address complaints made about child protection and about the school and staff
  5. 5. The Governors’ response No action against Head - allegations unfounded and malicious Ignored advice of agencies to suspend Head to retire at end of academic year Head to return as a consultant to effect ‘hand over’ Access to pupils to be monitor Ofsted inspection Did this satisfy the Charity Commission?
  6. 6. No….Commission found Governors failed to discharge their duty to act in the best interest of the School, its pupils, staff and stakeholders – Inadequate management of allegations about the Head – Failure to take adequate steps to protect beneficiaries (pupils) – Inadequate supervision and monitoring of activities of the School – Inadequate Child protection policies and procedures Complaints policy Decision-making processes Risk management processes
  7. 7. Intervention by the Commission Initial investigation - misleading information given Formal inquiry 1st direction for protection of charity - failure to comply 2nd direction for protection of charity – Governance review (six months) – Reports to Commission
  8. 8. Governance Review Delegation (policies and procedures) Procedures to ensure Governors engaged in the supervision of the school its staff and activities Complaints procedure Child protection policies and procedures, training Risk management strategy Make up of the Board of Governors
  9. 9. The lessons Governors responsible for overall management of the administration of the School – Act as a team, collective decision-making Governors ultimately accountable and responsible for decisions or actions of staff – Clear lines of accountability – Adequate reporting mechanisms
  10. 10. The lessons (cont…) Pay particular attention to the inherent risks associated with the work React quickly and responsibly to allegations of harm Have adequate policies to safeguard pupils - implement them - monitor them Protect the School’s reputation - manage risks and complaints
  11. 11. The lessons (cont….) Manage complaints - openly and transparently under a procedure Report serious incidents - significant risk to property, work, pupils, reputation IMMEDIATE - otherwise in the annual return
  12. 12. Conclusion Governors must be familiar with what their role entails by way of governance and the management of operational risk Formal induction Trustee training
  13. 13. Adrian Pashley senior solicitor, Charities and Education team New Kings Court, Tollgate, Chandlers Ford, Eastleigh SO53 3LG E: adrian.pashley@bllaw.co.uk T: 023 8085 7004
  14. 14. AFFORDABILITY In 1980 average school fees were equivalent to 22% of median salary In 2010 average school fees are equivalent to 40% of median salary
  15. 15. AVOIDING NASTY SURPRISES Strategy versus Tactics This means that independent schools are now 60% ‘more expensive’ than 30 years ago
  16. 16. Pupil Numbers Are numbers down throughout the school? Is there an inverted pyramid? Are enrolments dropping? Are there fewer footfalls/visits? Have there been changes in relationship/s with feeder schools? Has a recent marketing campaign or plan for growth failed or stalled?
  17. 17. Facilities Are you able to fully provide for current curriculum? Are parents asking for facilities you are not able to offer? Are your competitors’ facilities superior or are they marketing new facilities? If your school is on leased premises- is the lease coming to an end or is a rent review pending?
  18. 18. Competition Is there a new school in the area- this could be a State school or Academy? Has a local State school markedly improved its results and/or facilities?
  19. 19. Public Relations Has your school suffered recently from ‘Bad’ PR such as a food poisoning incident, bulling, child molestation claim, accident? Has your Head changed recently or been absent due to illness etc? Has the school recently been inspected with an outcome below expectations? Has there been an increase in parents’ complaints?
  20. 20. Strategic Have you been approached recently by another school/group proposing a takeover or merger? Are you considering going co-ed, changing/limiting the current age range/s, changing catchment area?
  21. 21. Governance Are you able to recruit Governors with the right skills or standing? Has there been a falling out between Governors or the Senior Management Team? Are your constitutional documents too restrictive?
  22. 22. Financial Has expenditure (including Capex) exceeded income for some time? Hve you been ‘forced’ to sell-off land or cash-in investments to fund general operation? Has your Bank reduced your overdraft facility or refused credit? Have your accountants/auditors raised concerns over your status as a ‘going concern’? Have you raised your fees at a rate exceeding the market average? Has there been an increase in requests for bursaries, scholarships and/or financial aid? Have you had increasing difficulty in recovering unpaid fees?
  23. 23. Staffing Does expenditure on salaries (including add-ons) exceed 60% of your general fee income? Are you suffering from a deteriorating pupil/staff ratio? Have you made significant redundancies in the last three years? Are a number of your key staff retiring? In the case of non-Charitable Trust schools- are the owners nearing retirement without a defined ‘succession’ plan in place? Has there been a loss of confidence/morale amongst the staff with an increase in turnover?
  24. 24. Key Tasks Check through Key Indicators to review current standing Anticipate what might happen when you are in the ‘good times’- do not wait for the ‘bad times’ Strategise for the school evolving to meet future trends, aspirations and needs Avoid temporary ‘tactical’ solutions Include all known external factors Agree a realistic vision for the school Involve all stakeholders in the implementation of the vision Seek ‘Change Agents’ from within the staff
  25. 25. Final Thought DO NOT BE AFRAID TO CHALLENGE THE: ORTHODOXIES AND “MYTHS” WHICH CURRENTLY DRIVE THE SCHOOL
  26. 26. isbi schools helping parents find schools • helping schools find pupils www.isbi.com schools • schools@isbi.com • 01980 620575 Andrew McEwen Consultant with isbi educational consultants ‘Avoiding nasty surprises – strategy versus tactics’
  27. 27. Future options: school mergers and buy  outs Peter Story, Consultant with isbi educational consultants www.isbi.com • schools@isbi.com • 01980 620575
  28. 28. Mergers and buy outs The main objective of a merger or buy out is to improve the business The customers (the parents) expect changes and need to be reassured,    while the new management will want to initiate changes. So the  parents need to be able to buy into the new vision As parents pay substantial fees they often believe they have a role in  managing a school.  In many charitable schools they hold the majority on the board of governors. This can skew the decision making process Any merger or buy out of a school with parents and pupils feelings  being involved will have problems.  With detailed planning most can  be overcome but, to be a success, by the time of an announcement  there must be a clear vision, with all major decisions made, and this  must be communicated by the new management  As an illustration of what can go right and wrong, my personal experience  of a buy out and a merger. Both closed premises and moved pupils onto a  new site...   
  29. 29. The buy out The proprietor of the school had had enough and it was probably  making a loss.   He wanted out, but with dignity and with the school’s name and general  ethos   being maintained He realised  his involvement, once the change of management had  taken place,  would be minimal, and he accepted that fact Prior to the announcement which, by design, came as a complete  surprise to  the parents, the management of the purchasing school had worked out  the  answers to the likely questions The key one was the retention of the Headmaster, it showed a degree  of  continuity At the parents’ evening, two days after the announcement, the new  management were able to present their vision The outcome We retained over 50% of the pupils. But, considering it was a day school  and that it was being moved 14 miles from a town to deep into the  country, we believed this was a success, especially as within 12 months we 
  30. 30. The merger We started discussions three years before it took place. But talks fell  through as  the senior partner in the merger (there is always one) would not  guarantee to  run the junior partner exactly as it was being run A majority of the junior partner’s governors realised that their model  was not  financially viable, but there were parent governors who felt it could at  least run  on in its uneconomic mode, at least until their own children were due  to leave  Two and a half years later they were back, asking for new talks, as the  banks  were threatening to foreclose
  31. 31. The merger, continued... As a result negotiations were hasty, with concessions on both sides and  key  decisions (staffing, fee levels, etc) had not been concluded prior to the  announcement being made It was made, at the bank's insistence, just prior to the start of the  Summer  holidays, giving parents a good long time to look elsewhere A further cause of problems was the agreement to let the junior  partners’ governors make the announcement to their parents, giving their version  of what they felt they had retained of their school’s ethos and modus  operandi  The outcome Despite efforts of the senior partner’s management to correct some of  the  statements that had been made, and to keep parents informed of the  other decisions as and when they were made, the parents found it difficult to  see a  complete picture Other schools had established visions they could buy into
  32. 32. Future options: sales and mergers Pat Carter, Chairman of National SchoolTransfer and isbi schools www.nationalschooltransfer.com • info@nationalschooltransfer.com • 01980 621251
  33. 33. School closures – 2009 and 2010 In 2009 school closures were prominently reported in the media Yet, as the ISC noted, actual closures in 2009 were similar to 2008 Lost jobs will affect families with children in the independent sector Analysts predict more pupils will be lost this September than last So there is likely to be a genuine increase in schools closing in 2010  On top of which some schools face problems with bank funding
  34. 34. However, all is not lost NST’s experience suggests three key messages:  Schools do not have to close IF trustees/owners plan far enough  ahead A merger or sale can save a school, but take advice well in  advance True of charitable trust schools as well as proprietorial schools
  35. 35. Charities CAN merge and transfer A charity’s assets – the school – can be sold  The proceeds are then used to meet the charitable objectives This can free trustees from running a business (the school) Simplifying their job to just running the charity itself Memorandum and Articles of Association may need amending Key message: a failing charitable school CAN be saved by  sale/merger
  36. 36. Competition – charitable trusts and proprietorial Charitable schools swim in the same waters as proprietorial But in changing times they cannot respond as quickly to a  problem  Or to an opportunity in the market place An owner can make decisions without calling a meeting of  governors Proprietorial schools may be able to weather financial storms  better  than some charities
  37. 37. Planning and confidentiality are crucial in mergers and transfers Proprietorial schools can merge and transfer with greater ease Confidentiality crucial to avoid parent and staff uncertainty  Information must be disseminated to as few people as possible An orderly merger or transfer requires  Organisation Forward planning  Advice from appropriate bodies  If not planned meticulously the potential for mistakes increases  The worst case is a leak before loose ends are tied up Which can precipitate the very problems one is trying to avoid!
  38. 38. School transfer... retention, cost and confidentiality The majority of 90+ schools NST has merged/transferred in 18  years  have seen pupil retention of well over 90% No school likes to admit openly that it is facing difficulties, but... A free audit of the school’s circumstances can often be  organised Advice on sale and transfer is in guaranteed complete  confidence
  39. 39. Public Benefit Joss Saunders, partner Charities and Education team E: joss.saunders@bllaw.co.uk T: 07711 443142
  40. 40. Revision Removal of presumption of benefit There must be an identifiable benefit or benefits – be clear what the benefits are – benefits must be related to aims – benefits must be balanced against any detriment or harm Benefit must be to the public or a section of the public – beneficiaries must be appropriate to the aims – opportunity must not be unreasonably restricted by geographical or other restrictions or by ability to pay any fees charged – people in poverty must not be excluded from the opportunity to benefit – any private benefits must be incidental 5 schools assessed July 2009: 3 satisfy the tests Up to 5 years to prove benefit
  41. 41. 7 pointers to pass the test Allocate responsibility Understand the requirement Assess the benefit Keep records Reporting and review Make necessary adjustments Avoid the pitfalls
  42. 42. Allocate responsibility Usually a governor Clear Terms of Reference Report to Governing Body, who carry the responsibility
  43. 43. Understand the requirement Knowledge base Charity Commission guidance – general – on education – on fee charging charities – example annual reports – outcome of 5 assessments published July 2009 Keeping up to date
  44. 44. Assess the school’s public benefit delivery Legal purposes Fees Bursaries Community involvement Other outreach
  45. 45. What do your objects say: between a rock and a hard place To advance the education of the pupils of the school To promote and provide for the advancement of education and in connection therewith to conduct, carry on, acquire and develop in the United Kingdom any boarding or day school or schools for the education of children of either or both sexes The advancement of education by the conduct of a school near Oxford for buys and girls up to the age of twelve
  46. 46. Keep records Keeping minutes Assembling statistics Successes and failures Admissions and rejections Applications for assistance Who are the people who benefit? Measuring against objectives
  47. 47. Reporting: making the case Charity Commission – Alltown example Review Publicly available Accessible by parents
  48. 48. Make adjustments Aims Decision making Financial accessibility – fee setting – bursary fund and fundraising New projects
  49. 49. 9 Pitfalls to avoid Lack of governor buy-in Not understanding the real meaning of the objects Tokenism Is the strategy sustainable? Is there a genuine means test? Failing to keep records It can’t just be any community involvement Ignoring the Commission’s guidance Failing to respond to Commission feedback
  50. 50. What does the future hold? Does change of government mean change of rule? Litigation challenge and the guidance What if you fail the test?
  51. 51. Joss Saunders Partner, Charities and Education team Seacourt Tower, West Way Oxford OX2 0FB E: joss.saunders@bllaw.co.uk T: 07711 443142
  52. 52. Safeguarding income in difficult times 9 February 2010 James Ragg, Partner - Charities and Schools www.hwca.com
  53. 53. This recession Speed of onset Delayed impact Multiple effects – Parents’ income – Overall economic uncertainty – Availability of finance www.hwca.com
  54. 54. Information Timely budgets and projections Fast actual results – speed vs accuracy Early initiation of key decision-making Focus on hard to control areas Construct “what-if?” scenarios and pre-plan actions www.hwca.com
  55. 55. Contribution Limited entry points, multiple exit points Short-term direct effect of recession - hopefully Long-lasting effect of a small entry Some income better than none, but… – Beware widespread or long-lasting discounts – Try and understand why parents buy Are all current discounts cost-effective? www.hwca.com
  56. 56. Summary Ensure speedy reporting of results A guesstimate in good time outweighs certainty arriving too late Forecasting pupil entry and exits is key Parental confidence is vital www.hwca.com
  57. 57. Finding and Evaluating Sources of Finance for Capital Projects and Working Capital Dorothea Dunn, Director of Education Santander Corporate Banking February 2010
  58. 58. THE JOURNEY……………
  59. 59. Clear and Mutual Understanding of Your Circumstances • Downturn in economy • Performance • Change – Today’s risks different to those of a year ago • No Room for Complacency
  60. 60. Homework! • How diversified is your school’s income? • How effective is your fundraising? • Do you have fixed cost structure – teaching/administrative staff contracts? • Are there sufficient reserves/cash for potential problems in the future?
  61. 61. What To Do Next ….. • Clear Development Plan • Awareness of Market Place • Viability of Operation/Project • Remain focussed with mindset to endorse change if necessary
  62. 62. Good News! • Funding is available for well run schools with sensible and conservative policies Refinance of existing facilities from other lenders Development facilities Facilities Revolving credit term loan facilities Working capital facilities Revolving credit up to 2 years, capital holiday and Terms interest only repayment Term loans up to 20 years Computers, telephone systems, catering equipment, Asset Finance coaches etc Interest Rate Certainity of rate Mangement Assist with planning cashflows
  63. 63. Banks Evaluation What to include to give credibility to your proposition Reputation/market/range of School subjects/competition/regulation/capacity to borrow Financial Performance Financial Projections – how robust? Historic Accounts Strategic Plan Management Vision for future Quality of Management team Business expertise/academic background Previous experience
  64. 64. Relationships • Cannot underestimate the importance of relationships • One size does not fit all! • Building a track record • If Existing Bank Not Engaging – Don’t suffer in silence – Find a new one! “Nothing can undermine a relationship more completely than a lack of trust” Robert Solomon, Leadership Now
  65. 65. Meet The Thames Valley Team The Santander Group worldwide has always believed in building long term relationships. We work closely with our customers to understand their business and aim to be true partners in promoting their success. This same approach underpins the Thames Valley Education Team Vanessa McCormack Dorothea Dunn Justin Hayward Chris Worsley Regional Director Relationship Director Relationship Director Relationship Manager 07798 581850 07920 531722 07809 493739 07809 493701 Vanessa.mccormack@alliance- Dorothea.dunn@santander.co.uk Justin.hayward@alliance- chris.worlsey@alliance- leicester.co.uk leicester.co.uk leicester.co.uk
  66. 66. 66 Banco Santander S.A. and (name of company) advise that this presentation contains representations regarding forecasts and estimates. Said forecasts and estimates are included in several sections of this document and they include, among others, remarks on the development of future business and future returns. Although these forecasts and estimates represent our opinions regarding future business expectations, perhaps certain risks, uncertainties and other relevant factors may lead the earnings to be materially different from what is expected. Included among these factors are (1) the situation of the market, macroeconomic factors, regulatory and government guidelines, (2) variations in domestic and international stock exchanges, exchange rates and interest rates, (3) competitive pressure, (4) technology developments, (5) changes in the financial position and credit standing of our customers, debtors or counterparts. The risk factors and other fundamental factors that we have stated could have an adverse effect on our business and on the performance and earnings described and contained in our past reports, or in those that we shall present in the future, including those filed with regulatory and supervisory entities, including the Securities Exchange Commission of the United States of America. N.B.: The information contained in this publication has not been audited. However, the preparation of the consolidated accounts has been established on the basis of generally accepted accounting principles and criteria.
  67. 67. Charitable Status Benefits vs. Costs 9 February 2010 Henry Briggs, Schools partner www.hwca.com
  68. 68. Charitable Status Benefits vs. Costs ISC Claims for sector as a whole Make up 83% charitable Effects of 12 years of Hard Labour – More or less charities? – Assisted places scheme replaced Will it now change? www.hwca.com
  69. 69. Hopeful Hall Hypothetical example Pupils 200 £000’s Fee Income 1,800 Teachers Costs (1,260) Other expenses (324) Surplus before taxes and bursaries 216 HEAD Mr Faith, only shareholder Co. Ltd by guarantee Site Owned by Co. worth £3m No depreciation Assumption All non bursary fee remissions the same for both www.hwca.com
  70. 70. Hopeful Hall 1) Profit from Education Ltd £000’s Surplus 216 Rates (36) Corp. Tax (38) £74k ‘cost of profit’ Net Surplus 142 2) Registered charity Ltd 7% 5% Bursaries Surplus 216 216 ‘cost of charity’ Bursaries (126) (90) Net Surplus 90 126 3) Profit > Charity 52 16 www.hwca.com
  71. 71. 4) Endowment to cover £’000’s Either income from Angels Association 40 13 or Capital Endowment 1,300 400 (Estimated yield of 4%) www.hwca.com
  72. 72. HOPEFUL HALL EVEN MORE PROFIT FROM EDUCATION Profit Motive Surpluses in sector more like 20% due to - • Tighter control of costs • Economies of scale on administration/ Senior staff salaries • May have less ‘social’ or historic burden compared to charitable competitors Other Advantages – • Ability to raise capital • No governing body! (streamlined decision making) www.hwca.com
  73. 73. WHAT ABOUT VAT? Not significantly affected by charitable status (advertising only) Supply of Education outside the scope of VAT For Mr Faith the cost might be c. £40k For all schools, opportunities are on – – Boarding Houses, new builds – Facilities such as sports halls, swimming pools www.hwca.com
  74. 74. Charitable Status Benefits vs. Costs Conclusions Should existing charities consider change? Governing document Charitable assets Existing charities on whom change is forced will need to devise scheme with Charity Commission Non Charitable Schools in existence may well keep the status quo Effect on start ups Future shape of sector www.hwca.com
  75. 75. Charitable Status Benefits vs. Costs Predictions Growth of ‘For Profit’ Schools in Independent sector Possible outsourcing in maintained sector The Swedish Model? www.hwca.com
  76. 76. Legal structures and Independent schools Adrian Pashley senior solicitor Charities and Education team
  77. 77. Charitable structures Trust or unincorporated association Company – usually limited by guarantee Royal Charter body Statutory corporation Watch this space! Charitable Incorporated Organisation (CIO)
  78. 78. Non-charitable Sole trader Partnership Companies limited by shares – School trading companies Community Interest Company (CIC) – Social Enterprise
  79. 79. In more detail…. Trust or unincorporated association - deed/scheme/constitution - Governors are the charity trustees - no separate legal identity - Governors personally liable individually and collectively for all the debts of the school - liability unlimited But… entitled to indemnity from the assets of the trust for all proper actions
  80. 80. In more detail…. Company (limited by guarantee) – memorandum and articles – Governors are directors/charity trustees – separate membership (usually Governors) – separate legal entity – liability limited to the level of guarantee (nominal) – Governors remain personally liable for acts in breach of trust/certain criminal offences – update for Companies Act 2006
  81. 81. Added Comfort CC and court can relieve a trustee if he/she has ‘acted reasonably, honestly and ought fairly to be excused’ Manage operational risk: - includes choice of structure - adequate insurances with appropriate levels of cover (employer’s liability, professional indemnity, public liability, property, vehicle) - contractual wording - limit liability to asset value - trustee indemnity insurance
  82. 82. Trustee indemnity insurance Insurance against claims for breach of trust or duty as trustees including negligence or default in their capacity as directors of a corporate charity NOT – normal third party claims or – pay debts of unincorporated charity But it cannot cover criminal penalties, costs or where governor knew or ought to have known actions not in school’s interests
  83. 83. The future? Charitable Incorporated Organisation (CIO) – registered/regulated by Commission only – model constitution – limited liability/corporate body – two-tier (trustees/members) – conversion from CLG – likely to be popular with smaller charities – simpler to administer (?) – when?!
  84. 84. Community Interest Companies (CIC) Relatively new form for social enterprise CLS, CLG or PLC CIC Regulator and Regulations ‘Community interest test’ Limited scope for investment – cap on dividends – cap on interest payments on debts/debentures More limited tax advantages
  85. 85. Trading subsidiaries Non-primary purpose trading activities – lettings – events Companies limited by shares Directors - at least one non-governor Tax VAT No subsidy - trading agreement
  86. 86. Current and future trends Mergers – Ethos and culture – Strategic drivers – Structure – Compatibility of fees and awards – Due diligence – Compatible objects? – Power to merge
  87. 87. Current and future trends (cont…) Convert to CIC? Sale to corporate Academies – conversion – lead sponsor Grant-giving trust Partnering & collaboration “Franchising”
  88. 88. Adrian Pashley senior solicitor, Charities and Education team New Kings Court, Tollgate, Chandlers Ford, Eastleigh SO53 3LG adrian.pashley@bllaw.co.uk

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