Matthew Wolton, a solicitor who specialises in MAT funding agreements, explains why some schools with precarious finances are now becoming “untouchable” – too risky for academy chains to take on:
“Historically, I have always been able to draft the funding agreement so that it allowed the MAT to stop operating an academy before the trust became insolvent.
“The Department for Education is now sticking to drafting that means that technically the MAT cannot be certain that it would be able to stop operating the academy before it pushed it into insolvency.
“What it means in practice is that now, as a MAT taking on a school, you no longer have the means or the ability to think, ‘If it all goes wrong, I can stop having financial responsibility for the school before it brings the whole family down with it.’
“This puts even more importance on the due diligence that you conduct as a MAT before taking on a school.
“Consider the scenario where a MAT is looking at a school which may join its chain. The school and the MAT fit with each other culturally – ie, they have the same values and the same views on education. All the legal elements are in the right place – eg, the land is owned in the right way. The finances are fine and there is a good pipeline of pupils.
“But then the MAT does a building survey and finds out that the building is in a very poor state and for it to be made safe £1 million-worth of work is needed. In such a situation, the MAT will probably say, ‘We’re not going to take that school on.’
“That is likely to be one of the main reasons for these untouchable schools. There are many schools that are in such poor physical condition that they need huge capital outlays and the MAT simply can’t fund it.
“And they can’t do it because the only place that money would come from is the other schools within the chain. And how happy would you be, as a parent or a teacher, if your school had to contribute £100,000 out of its budget to pay towards a new building for another school?”