Operating Overseas

 
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A trend has emerged over the past few years of British schools setting up schools overseas. This has been done in a variety of ways but from a legal perspective there are certain common themes that recur each time.

Why

There are two reasons why a school which is a charity may set up a new school overseas:

To further its charitable objects; or To generate income for the charity. It is very important to be clear about which reason applies in each case. This will have an impact on the structure, the tax considerations and the decision making by the Governors.

Furthering Charitable Objects

Many schools are not able to set up a school overseas to further their charitable objects because those objects are limited to providing education in a defined territory, such as "to educate children in Yorkshire". However, if the school does have sufficiently broad charitable objects then the Governors can exercise their discretion regarding the best way to further those objects. The Governors of such a school may determine, after having taken proper advice and considered an appropriately detailed business plan, that setting up a new overseas school is the best way to apply the charity's assets for the purposes of education in accordance with their charitable objects.

Generating Income

Alternatively, a school may decide to set up a new school overseas as a fundraising venture. Most schools have the power to fundraise in this manner, but this should be checked at an early stage. Once it has been decided to enter into the venture, the school needs to identify exactly what it is selling. Is the school selling its brand, in the same way that it may earn money by permitting its logo to be placed on a product? Alternatively or additionally, is there any expertise or copyright material being sold? It is likely that the revenue will need to be routed through a wholly owned trading subsidiary, to protect the parent school from risk and to ensure tax efficiency.

Legal Structure

The legal structure to be used will depend to an extent on the overseas jurisdiction in which the new school is being established. One option is for the parent school to own all or part of the new school. Ownership of a new school takes various forms but they are all characterised by an assumption of some of the commercial risk, with payment dependent on the success or failure of the venture. A second option is for there to be a contractual relationship with the new school, akin to any other...

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