New Term Checklist

Preparations for September 2020 were likely to have started earlier than usual as more pupils are welcomed back to school. What should be your priorities?

It has been the Government’s plan for several months that all pupils, in all year groups, will return to school full-time from the beginning of this term. As part of this plan, independent schools are also expected to follow the control measures set out in the DfE guidance when reopening.

Given the potential for further disruption over the course of the next academic year, schools will be looking at practical implementation issues, operating costs and the efficient provision of services, with the aim of minimising risks and maximising control over reopening. With a focus on commercial contracts, this article addresses a variety of issues that schools will encounter next term and provides some general guidance on where to start with contracts, fee recovery, school governance matters and commercial issues, including an update on the new insolvency legislation.

Contracts

• Schools will have a number of contracts in place with service providers and (for independent schools) parents, and would be well advised to review the contractual position so that the standard terms, as well as the ability to make changes, are understood.
• Schools should review the existing terms and conditions to see how they address issues of foreseeability, notice requirements, termination rights, mitigation and level of relief.

Force majeure

The purpose of a force majeure clause is to excuse a party to a contract from failing to meet their contractual obligations without any liability for breach of contract for that failure. The effect of a force majeure clause depends entirely on how that clause and the rest of the contract are worded. For an event to prevent performance of a contractual obligation it must make it legally or physically impossible. The fact that it is more difficult or expensive will not suffice.

• When considering whether to invoke force majeure, it is necessary to review the entire contract and establish whether one party is prevented from performing its obligations. The application of a force majeure clause may only apply to certain elements of the contract and the effect of this will be case specific.
• In the parent/school contract context, if the school has sufficient staff capable of working to meet its contractual obligations then they may be able to alter the delivery of the curriculum if Covid-19 becomes widespread again. Schools should look for a clause that may give them some flexibility to make changes to their location, facilities, term dates, school day and/or curriculum delivery. While this may be subject to a notice requirement or consultation with parents, this option may be helpful going forwards.
• Some of the school’s usual activities may not take place in September: trips, visits, excursions, sports fixtures, other extracurricular activities, extra subjects, after- school prep and after-school clubs may all have to be put on hold.  Depending on the contractual position, schools may have the option to invoke a force majeure clause in relation to any elements which do not form part of the normal curriculum.
• School trips may be delayed rather than cancelled, but the options and best way forward will depend on the circumstances. At the time of writing the DfE continues to advise against domestic (UK) overnight and overseas educational visits.
• What about a second spike or local lockdown?  While the focus has been on preparing for reopening, schools should also consider how they would react to a second round of school closures and actively work on their contingency planning.
• There is relatively little information on what the local lockdowns will look like, but the provisions for Leicester in June 2020 were largely the same as were applied nationwide for the original lockdown. The Government is due to issue further guidance on this shortly and will work with the local authority to provide support in the relevant geographical area.
• To claim relief under a force majeure clause, schools will need to establish that the “force majeure event” was the cause of their failure to adhere to the terms of the contract and is beyond their reasonable control. Schools will want to avoid arguments around whether the pandemic, rather than their lack of preparedness, was the cause for any non- performance under the contract.

Can we cancel contracts with third parties?

• Schools should take time to review the terms of their contracts with third parties, including catering, cleaning, transport, security services, lettings and hire arrangements. If a school is hoping to terminate any of these agreements, you will have to follow the express termination clauses in the relevant contracts. If there is no express termination provision, then the school may be able to terminate on reasonable notice.
• Where possible, it may be better to vary such contracts. Depending on the terms of the agreement, this will usually require consent from both parties.  Varying, rather than terminating the contract, may be useful for maintaining  a good relationship between both parties in the future, as well as allowing both parties to agree terms which they feel they will actually be able to perform. Schools should obtain legal advice before varying any contractual terms to ensure that this has the desired effect and is enforceable.

Fees

• Recovery of fees is likely to form an important part of managing cashflow for independent schools in the coming months.
• Many schools will still be dealing with unpaid fees and may face challenges from parents, given the different/limited provision of education that schools were able to provide during the school closures.
• Possible responses may include an offer of fee reduction for the period in which the school site was closed (if this has not already been offered) or an offer to draw up a fee repayment plan to allow parents more time to pay. These options should be offered consistently to reduce the risk of alleged preferential or unfair treatment.
• The substance of parental disputes will vary from case to case. All reasonable steps should be taken to avoid the complaints escalating either through the school’s complaints procedure or externally through legal claims.

How can we recover outstanding fees?

• Requests and reminders for payment should be clear. Looking to this term, schools should remind parents of the expected date for payment and promptly follow up with any instances of non- payment of fees so that issues can be discussed and resolved promptly.
• If an amicable resolution cannot be reached, schools may wish to commence legal proceedings to recover payment of outstanding fees.

Do be aware that from 1 October 2017, the Pre action Protocol for Debt Claims (the Debt Protocol) has required schools to follow a specific procedure before they can issue a claim in court to recover a debt (no matter how small the claim).

Governance

• Governors should be aware of the plans for reopening and satisfy themselves that all necessary risk assessments have been signed off, insurance cover is in place and that suitable protective measures are in place to enable the site to reopen.
• Perhaps the most common issue around governance will be a simple one: how the governors should meet and conduct their usual business. It would be prudent to review the school’s governing document to ensure that it provides for business to be conducted remotely via video or telephone conference. If there is no such provision, the governing document may need to be amended.
• Procedures should be established to ensure that any system for remote meetings is reliable, secure and that relevant documentation is made available in good time, proper minutes are taken and points for action are completed. There should also be clarity around how to call an emergency board meeting, should this be required.

Employment

• Staff should have been informed of the arrangements for September in advance of their return. The guidance suggests that schools should share a copy of the school’s Covid-19 risk assessment with the workforce and that staff should be involved in assessing workplace risks from a health and safety perspective. Issues around returning to work and raising concerns should be recorded and dealt with appropriately, including any variation to a role or terms and conditions of employment.

Company commercial update

• Many independent schools could become insolvent as a result of coronavirus disruption.  Some sector leaders, such as the Times Educational Supplement, have reported that this could be as many as 30 per cent of independent schools. Schools struggling financially in the current climate have likely already considered measures to reduce their costs and should continue to monitor the situation closely.
• The current environment may, in some cases, be conducive to school acquisitions and mergers as well as collaborative working locally to save costs. As the number of independent schools decreases, the supply of potential new pupils for the remaining independent schools grows. Whether to pursue a merger or an acquisition will require very detailed consideration by each school.

New legislation

• The Corporate Insolvency and Governance Act 2020 came into force on 25 June 2020. It provides for a number of measures which will be relevant to schools, including:
• Temporary measures: Winding-up petitions; Wrongful trading; Company filing and shareholder meetings. The Act reduces the filing burden on companies and charitable bodies, as well as the formalities for meetings of members.
• Permanent measures: New restructuring plan and restrictions on terminating supply contracts. Under certain circumstances, the Act also allows companies who may be approaching insolvency to apply for a moratorium lasting 20 business days. The directors will still be in charge of the day-to-day running of the company during the moratorium, but an insolvency practitioner (in the role of a monitor) will oversee their actions. The hope is that this moratorium will allow the company sufficient time to improve its financial position.
• There are a number of options available to schools in financial difficulty, some of which are new under the 2020 legislation. Time will tell whether these options are practical or utilised widely, if at all. It is therefore advisable to prepare early and speak to advisors early so that all options can be explored.

Concluding note

• School reopening plans will require co-ordination, co-operation and collaboration to succeed. Communication will be key. The physical and mental wellbeing of your school community should remain the top priority and sufficient time should be devoted to staff training and pastoral support for all.
• With the government guidance and our expectation of a “new normal” in mind, schools should delegate tasks appropriately and seek specialist, professional advice where required.

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For further information, advice or a discussion about a particular issue, please contact Vicky Wilson or your usual Wilsons contact.

 

This article was featured in the Autumn 2020 edition of Independent Insight magazine.