Academies and the company limited by guarantee structure

Louise Thomson FCG discusses academies and the peculiarities and benefits of a company limited by guarantee structure.

The academy trust schools movement can divide people like Marmite. To some they are a fantastic addition to the education sector, raising standards faster and with more oversight than maintained schools. For detractors, they can be viewed as opaque, lacking appropriate accountability and not significantly outperforming local authority schools in terms of providing a good education for young people. The chasm between the two views can be as wide and as feisty as those of Brexiteers and Remainers.

Part of some of the public’s suspicion of academy trust schools arises from a belief that the charitable company limited by guarantee (CLG) model in some way ‘privatises’ state assets and the provision of education. While CLGs are technically ‘private companies’, the nature of the charity status of academy trusts means that those involved in the governance of the organisation must not benefit from their position and if the charity was to wind up, its assets must be transferred to a charity with similar charitable assets – in all likelihood another academy trust.

The CLG format is an established and well-regarded corporate structure used by a range of non-profit making entities, including charities such as academy trusts. However, charities adopting the CLG structure have sometimes struggled with the competing demands of both charity and company law. The academy trust sector adds further complexity with trusts being exempt from registering with the Charity Commission (but not exempt from all aspects of charity regulation) and having to comply with education legislation and the oversight requirements of the Department for Education. There is a lot to understand for those with an interest in academy trusts and a lot that can be misunderstood.

If we were to start the academy movement again, the charitable CLG may not be the preferred option, but we are not in that position, so we have to make the most of the model we currently have. As such, The Chartered Governance Institute has developed a suite of guidance notes about the CLG structure aimed specifically at the academy trust sector. Designed to be read together or to dip in and out of, they provide useful insight into the peculiarities and benefits of a charity CLG.

While Marmite has tried to attract more ‘lovers’ by adding Guinness, peanut butter, or turning it into chocolate bars, the approach will not result in 100% success. Similarly, the academy movement will always have its ‘haters’. The organisational format of an academy trust will not prevent failure or poor governance, but a better understanding of the structure might make it easier to demonstrate that many are well run and delivering for their pupils and the wider community; and that success is something we want for all pupils regardless of what type of school they are educated in.

Download the new academy guidance from The Chartered Governance Institute

Louise Thomson FCG is Head of Policy (Not-For-Profit), at The Chartered Governance Institute.

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