Head teachers who are appointed as Directors of their Academy Trust
owe important legal duties under the Companies Act 2006 which can
easily be overlooked and land them in deep water if breached
Duty to act in the best interests of the
academy
Under the Companies Act 2006, directors have
a duty to act within the powers granted to them
and in the best interests of the academy. Whilst
head teachers must be able to demonstrate
that they genuinely believe they are acting in
the best interests of their school, they must also
show that their actions are within the powers
conferred on them by the Act. If actions taken
are outside of this, they cannot be in the best
interests of the academy, no matter how well
intentioned the head may be.
Duty to act in good faith
This means that a head must act in a way that
is most likely to promote the success of the
academy and the children. This means that the
head should consider:
- The likely long term consequences of any
decision
- The interests of the academy staff
- The need for the academy to foster good
relationships with children, parents and
other interested parties
- The impact the academy has on its
community and environment;
- Maintaining a reputation for high standard
of conduct and academic achievement
- The need to act fairly between members of
the academy’s trust board.
This duty applies to all decisions made by the
head and not just the formal decisions made by
the whole board.
A good rule of thumb is that a decision will
only be deemed to be in good faith if it is one
that a reasonable and intelligent head could
have concluded would promote the success of
the academy. Head teachers therefore always
need to have the best interests of the academy
at the forefront of their decisions.
Duty to exercise independent judgment
This requires heads to exercise their own powers
independently and exercise independent
judgment. The head can delegate some
decision-making responsibilities provided
these are authorised by the constitution of the
academy. If the head obtains professional or
other advice, they are still expected to exercise
their own judgment before deciding whether or
not to follow it.
Duty to exercise care, skill and diligence
A head must demonstrate that they acted in
a way that could be expected of a reasonable
head teacher (with a similar general level of
knowledge, skill and experience). Plus head
teachers with specialist knowledge will be
expected to demonstrate skills commensurate
with their own expertise.
Duty to avoid conflicts of interest
A head teacher must avoid situations in which
they have or can have a direct or indirect
interest that conflicts with, or may conflict with,
the academy’s interests.
Duty not to accept benefits from third
parties
Head teachers must not accept any benefit
(including a bribe) given to them in an attempt
to influence their decision, particularly in
circumstances where there is a conflict of
interest between what is in the academy’s best
interests as opposed to the head’s personal
interests.
Duty to declare an interest in a proposed
transaction or arrangement with the
academy
A head must declare to other board members
if they have any interest (direct or indirect) in
any arrangement with the academy. This might
occur where a family member of the head
has applied for a role or a contract, or where
the head has a personal financial interest in a
company providing services to the academy.
What happens if a head breaches any of
these duties?
The academy can bring a civil claim against any
head that breaches these duties and, if it has
suffered financial losses it could seek to recover
these from the head. Plus, if the breach was
sufficiently serious, the head can be dismissed
with or without notice.
Any contract or other arrangement entered into
by the head on behalf of the academy in breach
of a duty would be void, though it could be open
to the academy to ratify the agreement if it
wished to do so.
Options open to academies
Some academies will prefer to agree terms
where the new head has breached these
obligations and set these out in a settlement
agreement. The academy can agree not
to pursue the head for any claims it may
have against them in exchange for the head
resigning and going “quietly”. This mechanism
can also be used to reinforce or introduce
restrictive covenants and protect sensitive
information being disclosed to others by the
head.
The decision to litigate must be taken by the
board and it will have to weigh up the time
and cost involved in bringing a civil claim and
the likelihood of success and of recovery of
damages from the head. It may also wish to
avoid adverse publicity that these sorts of cases
generate. That said, Irwin Mitchell has had
success with pursuing and recovering money for
organisations previously and can help you reach
the best result for your school.
For general enquiries
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