Protect our governors

5th May 2000 at 01:00
Failure to sort out the personal liability nightmare is hardly a strong recruitment signal, argues John Hall.

There is one yawning, indefensible gap in the Learning and Skills Bill: the lack of any statutory safeguard for college governors against personal liability.

Imagine the nemesis of an FE college. The horizon is darkened by serious financial weakness and failing academic standards. Whistleblowing complaints are made to the Learning and Skills Council and the Department for Education and Employment, and there is staff unrest. The college's card is clearly marked. The LSC's hit squad moves in. Within weeks, the Secretary of State replaces the governing body and directs the college to merge with a financially stronger institution, or close.

In this scenario, governors may have acted with honesty, commitment and integrity, and yet be at risk of incurring personal liability. They may have inadvertently acted beyond their powers, taken decisions which were not properly delegated, offered specialist advice which turned out to be negligent, or breached responsibilit-ies so as to cause financial loss. The pressure to sue the former governors or whoever takes over the liabilities at the date of merger or closure may be irresistible.

To make matters worse, there may be a host of third party claimants - suppliers, staff, students or others - waiting in the wings to take a pot shot under statute or common law.

Of course, most colleges insure their governors against liability, but the policy will be of little comfort to those where claims exceed the maximum limit.

You would have expected Whitehall to have been responsive to governors' concerns that their voluntary part-time service should not place them at serious risk. You might have hoped that governors be given similar legal safeguards as those enjoyed by company directors. You might have hoped that it would have been readily conceded that board mmbers of public service organisations be treated equally under the law.

Section 727 of the Companies Act 1985 gives company directors one important protection: to apply to the court for relief from personal liability if it appears they "acted honestly and reasonably" and that "in all the circumstances ought fairly to be excused". But college governors have no such protection.

For the past five years, Whitehall has refused to accept the need for any additional safeguards, despite the most eminent legal advice. In June 1998, Lord Neill's Committee on Standards in Public Life made three main recommendations: that the Law Commission should consider if legislation should be developed to clarify governors' duties and responsibilities; that clearer guidance should be promoted to emphasise the low risk of personal liability where a governor has committed no wrongdoing; and that the law should be changed to give governors of statutory corporations the same protections as company directors.

The paper said the FEFC's Guide for Governors (May 1994) had the "potential to mislead" by suggesting that governors of corporations will automatically benefit from the protections available to company directors. But nothing happened bar a repeat of the mantra that if governors act honestly and without ulterior motive, they have nothing to fear.

It appears that a turning point was reached on February 17 when Lord Bach informed the House of Lords that the Government was, after all, prepared to reconsider the issue. Since then, the DFEE has been consulting within FE.

However, ministers should be left in no doubt that the only satisfactory solution is legislation based on the Neill recommend-ations. Failure to amend the Learning and Skills Bill will send out a clear signal of indifference which can only damage recruitment and retention.

John T Hall is head of education law at Eversheds, solicitors, London EC4

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