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Education briefing - Sixth form colleges converting to academies – is now a good time to re-assess?

  • United Kingdom
  • Education - Briefings

05-03-2021

Introduction

The recent White Paper on post 16 education shows a clear ambition to focus on skills training. Sixth form colleges with a predominantly academic offering, may be left wondering how they will ride this wave. Might now be a good time to re-assess their position in the FE sector and consider a move to align more closely with the schools sector which has, in recent years, remained relatively stable, if still underfunded?

Conversion to academy status has been an option for sixth form colleges since 2016. Born out of the area reviews, the Department for Education (DfE) is now receptive to applications from sixth form colleges which can demonstrate potential for success in the schools sector – both financially and in terms of student attainment.

The DfE published Becoming a 16-19 academy: advice for sixth form colleges in July 2019.

The advice indicates that the aim of allowing conversion to academy status is to encourage sixth form colleges, with their focus on academic programmes, to partner more effectively with schools and improve value for money through efficiencies and economies of scale (whilst preserving the distinctive character of their offering). One of the financial benefits of converting to academy status is the ability for the sixth form college to reclaim its VAT on non-business expenditure, which academies are currently able to do whilst sixth form colleges are not.

Colleges eligible for conversion to an academy

SFCs must have at least 80% of students aged 16-18.

Exceptionally a further education college might be eligible for academy conversion if at least 80% of its students are aged 16-18, with the majority studying academic programmes. However, there is no general policy on FEC conversion and any proposals to do so would be on a case by case basis.

Timing for conversion to an academy

Colleges are advised to develop their proposals before applying to convert – which means preparing clear plans for establishing or joining a multi academy trust. The DfE have certainly moved away from automatically allowing sixth form colleges to convert as a standalone single academy trust and any proposals to do so will have to be supported by robust and developed plans for working closely with other schools and academies.

Colleges should discuss their proposals at an early stage with their ESFA case manager, consider if they are eligible for conversion under the criteria in the advice, explore possible school partnerships, consider getting early independent legal advice, explore the implications of conversion and undertake appropriate financial and legal due diligence on their prospective partner(s). Colleges are advised to allow 4-6 months from DfE approval for implementation of the conversion process. Applications are initially assessed for viability by the ESFA and the relevant Regional Schools Commissioner (as advised by the Headteacher Board).

Applications need to give assurance that the academy will be solvent financially viable, sustainable and will confer an educational benefit. They must identify any issues around the institution’s assets, liabilities (including, in particular, bank loans), contracts, and any LGPS deficit.

Applicants are advised to consult with staff, students and local stakeholders about a proposal to convert. It should be noted that such consultation is in addition to the statutory consultation required before a college corporation can resolve to dissolve and transfer its assets to another body. In any event, consultation is an effective way of minimising the risk of legal challenge to conversion.

Applicants must secure agreement to conversion from the college corporation, the trustees of any supporting foundation, the diocese if the college is a Roman Catholic SFC, from lenders etc. as well as from any multi academy trust which the college proposes to join on conversion.

Process for conversion to an academy

If the application is approved, a £25,000 support grant is provided towards the legal and other costs associated with becoming an academy. The sixth form college can then proceed with:-

- undergoing a robust due diligence exercise – both on itself and any multi academy trust it proposes to join, or on its proposed partners if a new multi academy trust is being established;

- going through a statutory consultation process to dissolve the sixth form college corporation;

- running a TUPE process in respect of affected staff;

- negotiating legal agreements to record a transfer of its property, rights and liabilities to the successor MAT;

- resolving any arrangements with third party stakeholders e.g. lenders, the LGPS fund, higher education partners, key suppliers;

- addressing any VAT charges which may be triggered on conversion e.g. on zero rated construction projects;

- dealing properly with any commercial or income generating activities and securing their continuation in a multi academy trust structure.

How Eversheds can help with sixth form college conversion to an academy

There are many factors which college corporations and senior management will need to consider before any decision to apply for academy conversion is made. Eversheds have extensive experience in advising sixth form colleges at key points in their development, and in relation to academy conversion and operation. Our team can expertly guide you through the process as well as provide strategic and operational advice should you decide to proceed with conversion.