The Academies Financial Handbook is updated annually by the Department for Education (DfE) and the Education and Skills Funding Agency and despite its name, the handbook contains an ever-growing number of governance requirements for academy trusts.

The September 2020 edition of the handbook included further clarification of the Department’s position regarding the membership of trusts. As well as confirming a strong preference that trusts should have five members (in order to ensure a range of skills and experience amongst members and also to ensure that members’ resolutions can successfully be passed even if opposed by one member), the 2020 edition introduced a prohibition on employees being members (the previous position being merely a recommendation against). This prohibition takes effect on 1 March 2021.

Academy trusts which have employees as members (most likely the headteacher/principal in a single academy or the CEO in a multi-academy trust) now need to take urgent action. If the trust’s articles of association do not specifically provide for the headteacher/principal/CEO to be a member, all that is required is for the relevant employee to resign as a member by submitting a formal letter of resignation and for the trust’s register of members to be updated to reflect the resignation. This assumes that the resignation will still leave at least three members in office as required by the articles. If not then a new member (or members, bearing in mind the DfE’s preference) will need to be appointed before the employee can resign.

If the articles of association specifically name the headteacher/principal/CEO or other staff position in the list of members then the position is more complicated. The articles of association will need to be amended to remove this provision and that change will require the prior consent of ESFA. If the trust has an older version of the articles of association then there is a risk that in granting consent to the change ESFA will require the trust to adopt the current model articles. This may be no bad thing from a good governance perspective but such a change may also give rise to a need to adopt the most up to date funding agreement in which case a minor change to the Articles suddenly becomes something rather more significant!

Finally, we should mention that regardless of the DfE’s preference for five members, trusts should seek to avoid being in a position of having only three members. This is because for some years now trusts have been obliged to maintain a register of persons with significant control (PSC). The definition of a PSC is complicated but, in essence, a PSC situation is avoided if there are at least four members since a person cannot, generally speaking, be a PSC unless they control more than 25% of the votes at membership level. Provided there are never less than four members there should be no issue but if the number of members reduces to three this impacts upon the records which need to be kept. This in itself is a good incentive to have at least four members or preferably five in order to avoid any difficulties if a member resigns.

For more information

If you require any assistance in relation to any of the issues featured in this briefing or on any other governance matters for your trust please contact Phil Watts.