UK: A Guide To School Mergers

Last Updated: 1 October 2012
Article by Mike Scott and Sarah Chiappini


A recent and growing trend in the independent school sector is one of schools exploring the possibility of mergers with other schools. The reasons for this are many and varied but may include the following:

  • Operating margins are low, so pupil numbers are critical. Fixed costs are escalating and to counteract this, schools are increasing their fees. If the fees remain above inflation levels for any sustained period, this in turn could threaten pupil numbers, especially in the strained economic times in which we find ourselves. A merger should achieve higher pupil numbers and reduce costs ratios.
  • School premises are always in need of renovation, maintenance and improvement and are a constant drain on resources. Although the Charities Act 2006 relaxed the rules slightly relating to the spending of permanent endowment (of unincorporated charities), it may still be preferable to realise the asset value of one school's property and use part of the proceeds to modernise and extend the premises and facilities in another school.
  • The combined brand and resources of two well-known schools may be more attractive to future parents than one, and consequently will assist in the marketing.

However, the governing bodies of schools contemplating a merger will need to consider the possible negatives as well as the positives when coming to a decision. Obstacles and difficulties associated with school mergers are varied and include:

  • The possibility of disruption, as management time required on the project can interfere with the running of both schools, and ultimately therefore, the education and welfare of the pupils.
  • The anxiety which a merger can bring about. Pupils and parents may lose confidence in the prospects for the merged school and may consider moving to another school.
  • The damage a merger can bring to a brand, especially if the merger does not go ahead.
  • Incompatibility of the specific charitable objects of each school.
  • The possibility of a culture clash between the two schools in question and the difficulty in dovetailing the different ways in which the schools are run, and the parents to whom they appeal.
  • The almost certain need to reduce staff levels as a result of the merger.
  • Objections of third parties (other than the immediate stakeholders, being pupils, parents and staff).
  • Professional and other costs.


There are various reasons for choosing a particular method to implement a merger but it is usually driven by the structure of the two entities involved (ie whether or not they are incorporated) and whether any liabilities may arise as a consequence of the merger. The merger will usually be achieved by one of the following methods and which one will be the most appropriate will largely depend on the factors mentioned above:

  • school A transferring its undertaking (ie the business of running the school), assets and liabilities to school B, or vice versa; or
  • school A and school B both transferring their undertaking, assets and liabilities to a newly established charitable company ("Newco"). (This is sometimes regarded as preferable to the first option, as a means to avoid the perception that one school is taking over the other); or
  • school A being appointed as trustee (or sole corporate member) of school B or vice versa.

As you may be aware, the Charities Act 2006 introduced a new legal entity, the charitable incorporated organisation ("CIO") which may become increasingly relevant in mergers. A CIO will have a legal personality of its own, like a company, but will only need to be registered with the Charity Commission (and not Companies House). However, secondary legislation is required before CIOs will be available. After a consultation on the draft secondary legislation took place in 2009, the Office for Civil Society has had to revisit and substantially revise its proposed first draft. At the time of writing this guide the final form of the legislation has not yet been published and is not now expected before the end of 2012.

It is widely believed that the CIO structure will be a watered down version of the original vision and at least initially won't be a suitable form for larger more complex charities. It is also believed that conversion to a CIO from an existing charitable entity will not be initially possible, as this will require further secondary legislation in the future. The first to use the CIO structure are likely to be the guinea pigs, and may pay for being the pioneers of the new structure in time and expense until the inevitable teething problems associated with the new structure have been overcome.

Key Issues

Below are some key issues which the governing bodies of each school contemplating a merger should bear in mind at the very outset.

Best Interests

Governing bodies have overriding duties under charity and/or company law and to fulfil these, a fundamental question they should be asking themselves is whether it is genuinely in the best interests of their school, and the achievement of its charitable objects, to proceed with the merger, or are there other options?

The decision-making process will involve, amongst other things, the consideration of legal, financial, and reputational issues.


It will be necessary to ensure that the specific objects of the merging schools are compatible. For example, if the objects of school A specifically include a restriction that it shall only educate boys but school B is a co-educational school, then it will be necessary for the former to apply to the Charity Commission for a cy-près scheme pursuant to section 62 of the Charities Act 2011 to lift the restriction in its objects so that it can merge with a co-educational school. This should be put in train and the Charity Commission approached at the earliest opportunity.

Power to Merge

Initial consideration will have to be given as to whether the constitutions of both schools contain a power to merge, and in the manner proposed. If the existing powers are unclear or are prohibitive, then legal advice must be sought, as the relevant documents may need amending in order to proceed and this may require the prior consent of the Charity Commission.

Equality Act 2010 Considerations

It may be necessary to obtain a transitional exemption order from the Equality and Human Rights Commission if one or both schools will, upon the merger, change from a single sex to a co-educational school. We recommend that specialist legal advice is obtained at the earliest opportunity.

Consent from the Department for Education

The Education Act 2002 requires all independent schools to be registered with the Department for Education ("DfE"). Certain changes to a registered school require the prior approval of the Secretary of State for Education. The changes requiring such approval are:

  • a change of proprietor;
  • a change of school address;
  • a change in the age range of pupils;
  • a change in the maximum number of pupils;
  • a change to admit boys only or girls only or become co-educational;
  • a change to provide boarding accommodation; and
  • a change to permit pupils with special educational needs.

It is likely that a school merger will trigger at least one of these changes and that one or both schools will need to obtain the prior approval of the Secretary of State, so the DfE should be approached at the earliest opportunity.

Steering Committee and Heads of Terms

The appointment of a steering committee, which should include key representatives of the two schools, is helpful to manage the project. The committee can negotiate and agree initial heads of terms (subject always to final approval of each governing body). In our experience these should be fairly broad as if the parties seek to make them too detailed from the outset this can hinder progress. Any conditions need to be clearly set out, including the time by when they must be fulfilled or waived. The steering committee can also remain in place throughout the process in order to implement the agreed terms and, if necessary, be given further powers by the governing bodies to discuss and resolve any issues which arise along the way.

Consideration should be given to whether any provisions in the heads of terms should be legally binding (such as confidentiality or those relating to costs), which could be particularly relevant if the merger talks fail.


Consideration will have to be given as how best to manage the expectations of both the stakeholders (particularly parents, pupils and employees) and the public. The schools may decide that they wish to keep the proposed merger away from the public domain until the documentation putting it into effect is signed. One advantage of keeping the negotiations confidential is that there is less involvement and input from third parties, making the transaction more manageable, and minimising anxiety and uncertainty. The disadvantage is that it is likely to be even more of a shock when the formal announcement is made, and that might have more of a negative impact than if interested parties had been consulted beforehand. The steering committee will want to agree the content of reactive and pro-active announcements.

Due Diligence

Each school will want to carry out legal, financial and academic due diligence on the other, in order to ensure that the merger is in the best interests of the school and its pupils. This involves the onerous, but necessary, procedure of assembling and assessing all the relevant information and documentation relating to each school. Due diligence will take on particular importance for the transferee school, but a transferor school will still want to be reassured that the transferee is an appropriate beneficiary of its assets and undertaking. A report from each school's advisers (ie legal and accountancy) will be vital in determining which assets and liabilities are to be transferred, the areas and level of risk and any other issues which might affect the viability of the merger.

Contractual Consents

Consents are likely to be required from parties to contracts which the transferring entities have entered into. It is important that material contracts are identified at an early stage. However, if the merger is to remain confidential, thought will have to be given as to when to approach these third parties in order to obtain approval. In some circumstances it might be appropriate to ask third parties to sign a confidentiality agreement but legal advice should be sought beforehand.


Each of the schools will have to consider their financial circumstances and, in particular, whether or not they will be transferring any debt to the other school or the Newco. If not, how is it envisaged that the debt will be repaid? If debt is to be transferred, then the relevant documentation will need to be reviewed to assess which consents are needed and whether or not the lenders have, or will have, the unilateral ability to change the terms of the loans or even terminate their financial support altogether. This is especially important if there is to be a split exchange and completion, as both schools will want to continue to operate as normally as possible during the interim (please see the paragraph headed "Timing" on page 7). Furthermore, it is likely that lenders will have secured any substantial loans taken out on the property and assets of the schools. If the debt is not to be redeemed, separate consents will need to be obtained relating to the transfer of this security. The lenders will want to carry out their own due diligence to ensure that they are prepared to accept the transferee entity (or Newco) as the new borrower and mortgagor, and may ask for third party or personal guarantees of the obligations of the new borrower.

On a more general note, other day to day debts will also be owed by and to each school. Agreement will need to be reached well in advance of the signing of the documentation as to how these debts are to be dealt with at completion. In most cases, all the debts of the transferor school will be passed to the transferee on completion but there may be circumstances where this is not appropriate. It will be important to ensure that school fees paid in advance under those parent contracts which are taken on by the merged school continue to be held as a separate fund to be applied in payment of fees at the appropriate time.

Property Issues

Schools' land and buildings are usually their most valuable assets and therefore significant in any proposed merger. If a school is transferring property and it is a registered charity, the relevant provisions of the Charities Act 2011 must be complied with. If either or both schools are transferring leasehold land, landlord approval will probably be required and an extension to the term of a particular lease may be necessary. Planning consents could also be fundamental to the transaction and therefore form part of the conditions to the merger (as discussed above). For example, consents may be required for the development of the site of the transferor school and if more buildings are to be constructed as part of an improvement to the facilities of the transferee school. As real property and environmental issues often go hand in hand, it may in some circumstances be advisable to commission an independent environmental audit as part of the due diligence exercise, but these can be very costly.

Property held on trust/as permanent endowment

Even if a school is incorporated, it will frequently be the case that some of the property used for the purposes of the school is held on trust rather than as the school's own property. That being so, careful consideration will need to be given to the terms of the particular trusts, and whether the trusteeship can be changed or how the property can otherwise be transferred. If the trustees of the trust are different from the school's governing body, discussions will need to be initiated with them at the earliest opportunity. Many schools will have permanent endowment, i.e. property held on trust, the capital of which cannot be spent as if it were income, and the use of which may be restricted to a particular purpose. Although the Charities Act 2006 to a degree relaxed the rules on the spending of permanent endowment, restrictions remain. Consequently, an application may still need to be made to the Charity Commission for a Scheme or an Order pursuant to the relevant provisions of the Charities Act 2011 to resolve these issues (by, for example, appointing the transferee as the trustee of the transferor's permanently endowed property), and this can take time. The trustees of the permanently endowed property will have to make any such application and, again, if they are different from the schools' governing body, their co-operation will be essential.

Employment and Pensions

Employment and pensions are potentially difficult and emotive areas and so will need to be addressed at an early stage. 'TUPE' Regulations give employees of transferring businesses rights to enjoy the same terms and conditions of employment with the acquiring party that they enjoyed prior to the transfer. Both schools will be required to inform and consult with their employees within specific time frames. As it is unlikely that all staff will be required after the merger, employment law principles and procedures under which redundancies and other dismissals are carried out will also need to be strictly adhered to.

The parties will also need to review the pension arrangements in place for the staff of each school prior to the merger and assess potential liabilities which may arise postmerger. The considerations will depend on the type of pension arrangements each school has in place prior to the merger (for example: an occupational pension scheme or personal pensions; a defined benefit (final salary) scheme or a defined contribution (money purchase) scheme). Problems are particularly likely to arise where one or both of the schools sponsor(s) an underfunded defined benefit scheme and, as with employment, there are consultation requirements where changes to members' pension arrangements are proposed.

Name and Branding

The steering committee should discuss and agree at an early stage what the name of the merged school is to be and how it is to be branded. For example, should the name and brand stay the same as that of the school which is, in effect, 'taking over' the other, should it be a combination of both (to preserve the identity of both existing schools), or should it be a completely new name and brand (to reflect the new future)? Marketing, publicity and goodwill are obviously significant areas of concern here and it may make sense to engage a PR firm for this purpose. However, legal advice will also be needed as to whether any proposed new name and branding will infringe any third party intellectual property rights and also, if applicable, whether the new name will be acceptable or obtainable under company and/or charity law. The Companies Act 2006 provides for a 'names adjudicator' to consider any new company names which are too similar to one currently used by another individual or entity, and any person or entity is able to lodge an objection to a new name on the basis that he, she or it already has goodwill in that name.


It could be that there is a gap between the signing of a binding agreement and the date on which the merger legally takes effect, i.e. a 'split exchange and completion'. Whether this is necessary will depend on a number of factors, some legal (such as certain consents needing to be obtained) and others logistical (such as preparing the schools for the merger or coinciding the effective legal transfer date with school terms or academic years). To reflect this, conditions (which have to be fulfilled by one party or waived by the other) will often form part of the contract, so that if they are not met or waived within a certain period, completion of the merger does not take place.


The Commission now keeps a register of charity mergers which are notified. The register distinguishes between two types of merger: (i) where a charity transfers all its assets to another and then ceases to exist; and (ii) where two or more charities transfer their assets to a newly created charity and then cease to exist. The register of mergers was introduced by the Charities Act 2006 and at that time, it was thought that this register would alleviate the need to keep a transferor school in existence (but dormant) on the Charity Commission register after a merger took place solely for the purposes of safeguarding future legacies. However, it has transpired that some legacies (depending on the wording used in the will) may still fail if the transferor school has ceased to exist. The current advice therefore remains that the transferor charity should be retained on the Charity Commission register as an empty shell for the purpose of collecting legacies and transferring them to the transferee charity.


The non-legal and logistical issues are just as important as the legal issues. Who will teach whom? What subjects will be taught? Will the schools remain 'separate' in all but name and ownership? If years are to be assimilated, how will this be carried out? Where will extra staff and/or pupils be housed and accommodated?


School mergers are often perceived as school closures (and are therefore usually sensitive) and because they often result in complicated issues, the importance of planning well in advance and obtaining professional advice at an early stage cannot be too strongly emphasised. It is imperative that the merger is managed efficiently to a manageable timetable and with due care in order to minimise any perceived or actual negatives.

On the other hand, mergers may constitute an ideal opportunity for schools to maximise their capabilities and resources, and for the governing bodies to provide the best possible education and infrastructure for their pupils, setting the foundations for all-round success in the future.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.