12 Jul The legal aspects of school governance
Luke Ainsworth is a solicitor at berg, who support schools and academies with legal issues. In this guest blog post he gives an introduction to those aspects of governance which have a legal implication, and what new and existing governors should bear in mind about their wider legal responsibilities.
Governance, along with the accountability associated with its legal aspects, continues to be one of the key issues within education – becoming a school governor carries with it not just a great moral responsibility to promote and advance the educational prowess of your school, but significant legal responsibilities as well. The obvious starting guidance for any new school governor is to ascertain as much as information about the school as possible by carrying out your own “due diligence”, for example, by reading the school’s annual report, key policies and internal constitution and rules.
Various types of school, including mainstream, voluntary aided and/or controlled, and academies, are run by state funded independent charities. Accordingly, the governors are automatically charity trustees. Charity trustees are responsible for the general control, management and effective administration of a charity. Although such charities are exempt from registration with the Charity Commission, the governors of such charities are still subject to the same duties which are applicable to all charity trustees. These duties involve a high degree of responsibility. A trustee is said to sufficiently discharge their duties when managing trustee affairs if they take all those precautions “which a prudent person of business would take in managing similar affairs of their own” (as per the judicial comments in Speight v Gaunt ). The fact school governors receive no remuneration for their service does not in any way diminish their responsibility, nor discharge them if they breach their duties as trustees.
The duties of trustees can be summarised as follows:
Act within the law and within the school’s powers:
You must at all times ensure that the school acts within the strict terms of common law (i.e. the laws made by judges in court) and statutory law (i.e. the laws made through Acts of Parliament). Furthermore, governors must not exceed the terms set out in the formal governing document (e.g. a trustee deed or articles of association) with which you should familiarise yourself. This document will contain important information such as the powers of the charity and its purposes. If in any doubt about the contents and meaning of this document, you should seek advice from the school’s legal advisor or obtain your own independent legal advice.
Keep up-to-date annual returns and accounts:
The Charity Commission will require full transparency with regards to the running of the school. They will want to see that it is well run and, of course, financially solvent. You should obtain the latest financial accounts and the school’s business plan and become acquainted with the financial controls in place at the school to reduce the risk of fraud or theft. You must look at these in a critical way to assess if they are strong enough.
Duty of prudence:
As a governor, you must ensure that school funds and resources are used at all times with reasonable restraint. These resources can only be used to further the charitable aims and objectives of the school. The charitable aims are paramount. Above all, you must avoid entering into speculative or risk-laden arrangements that could result in a loss to the school’s assets, property and also its reputation as an educational institution.
Managing conflicts of interest:
School governors are drawn from a variety of backgrounds and will deal with a variety of people and organisations with different objectives and priorities. It may be tempting to promote one view point over another. You must avoid situations where a conflict may arise between your interests, or the interests of those who appointed you, or those who might have some moral or practical influence over your decision making and the best interests of the school. Your overall duty is to the charity i.e. the school.
Exercise of reasonable care and skill:
School governors can use their own relevant personal knowledge (e.g. if they are an accountant) but should always consider taking professional advice where appropriate. If there is an area where you lack specialist knowledge, perhaps contract law, then you should err on the side of caution and seek independent advice. For example, it would be no defence for you to say that you did not appreciate the subtleties of contract law when you find that the school is exposed to a number of burdensome clauses.
The word fiduciary derives from the Latin “fide” meaning to trust. There are certain high level duties that are placed upon a trustee, which include a duty of loyalty, and the prohibition upon making a profit from your position. In other words, if certain financial or profit making opportunities come to you in your position as a governor, these must be disclosed to the governing body and their permission obtained before exploiting these opportunities.
School governors must be very careful in meeting their obligations, as if they fail to comply with the terms of the trust or their fiduciary duties, they can be made personally liable to put right or “restore” any losses to the trustee school’s assets. This can mean broad reaching compensation for all losses that would not have occurred “but for” the breach of the trust (see case Target Holdings Limited v Redferns  A.C.41).
Questions for governors and trustees
- Am I aware of all of my legal responsibilities as a school governor?
- How does the type of school where I am a governor affect those responsibilities? Are they different to a school where I may have been a governor previously?
- Do I understand what a charitable trustee is – and what are the fiduciary duties that are applicable to me if I’m in that position?
- Am I in a position to identify conflicts of interest – both my own and others’ – and act appropriately?
- Have I obtained all necessary documents to review to ensure that I am fully aware of the procedures and duties that are relevant to me?
- Am I the only member of my board to have asked myself these questions, or am I sure that my fellow governors and trustees have considered this area as well?