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Education Act 2002

Chapter 3 – Powers to form companies etc.
Sections 11 to 13
Section 11: Powers of governing bodies to form or invest in companies to provide services etc.

67.This section provides a new enabling power so that the governing body of a school can form, or take part in forming, companies to purchase goods or provide services for other schools. Such a company could provide, or help with the provision of, facilities or services for schools. It could, for example, provide, or arrange the provision of, the financial, technical and legal advice that schools would normally have to arrange elsewhere, and it could also procure suppliers through the use of standard specifications and contracts.

68.In addition, maintained schools may form companies to deliver services to any schools on behalf of an LEA, pursuant to a ‘contracting out’ order under the Deregulation and Contracting Out Act 1994, and/or to provide traded services to schools. The section requires companies to be registered under the Companies Act 1985 as companies limited either by shares or by guarantee.

Section 12: Limits on powers conferred by section 11

69.This section requires maintained schools wishing to form or join companies established for the purposes of section 11 to obtain the consent of their LEA. Regulations will set out the basis on which an LEA may refuse consent. Only schools with a delegated budget will be able to belong to such a company.

70.The section provides for regulations to deal with such matters as the constitution of the company and the effect of the delegated budget being withdrawn from a member school. Companies may not borrow money without consent.

71.Regulations will put in place arrangements for the financial monitoring of these companies and powers to address any financial mismanagement of the company.

Section 13: General powers of Secretary of State in relation to companies

72.This section provides for the Secretary of State to form, take part in forming, or invest in a company for purposes connected with her education functions.

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