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Why and how should academy trusts manage conflicts of interests?

25 November 2021

We look here at the legal and practical reasons why academy trusts need to manage conflicts of interest and what this means for them in practice.


Conflicts of interest have been topical of late, with consultancies and other paid roles for MPs in the spotlight. However, conflicts of interest continue to be an issue for academy trusts with the ESFA’s 2020/21 assurance work highlighting the ‘failure to identify and document conflicts of interest appropriately’ as a ‘main issue’.

So, what are conflicts of interest, how are they regulated and what must and can academy trusts do to manage them to ensure their continued success and avoid undermining public trust and confidence in their work with children and communities?

How conflicts of interest regulated?

In order to understand what is meant by a conflict of interest, we first need to identify the legal and regulatory framework which governs conflicts of interest for academy trusts as DfE-funded exempt charities and companies limited by guarantee. This is set by:

  • charity law: trustees must act only in the best interests of the trust and avoid any conflict between this duty and any personal interest they may have;
  • company law: trustees, as company directors, must avoid a situation in which they have, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the trust;
  • articles of association: the DfE model articles define a conflict of interest for a trustee and prescribe how conflicts of interest must be handled;
  • fiduciary duty: members owe a fiduciary duty to act with single-minded loyalty in the best interests of the purposes of the trust, in accordance with the articles and charity and company law;
  • Academy Trust Handbook: the Handbook requires trusts to record and publish details of business and pecuniary interests.

The Charity Commission publication Conflicts of interest: a guide for charity trustees (CC29) includes further detail on the charity and company law position and other practical advice which I draw on here and which is referred to in the Handbook.  A trust’s funding agreement also requires it to have regard to Charity Commission guidance.

What is a conflict of interest?

A conflict of interest is any situation in which a trustee’s personal interests or loyalties could, or could be seen to, prevent them making a decision only in the best interests of the trust.

The DfE model articles further define a conflict of interest as ‘any direct or indirect duty or personal interest (including but not limited to a personal financial interest) which conflicts or may conflict with their duties as a trustee’. A personal financial interest includes any such interest in:

  • a benefit as a beneficiary of the trust;
  • an indemnity arrangement (e.g. under commercial insurance or the RPA);
  • goods or services purchased from or provided to the trust;
  • property sold to the trust;
  • rent received from the trust;
  • interest on money lent to the trust;
  • employment by or remuneration from the trust; or
  • any other financial benefit from the trust.

A conflict of interest will therefore usually arise where:

  • there is a potential financial benefit directly to a trustee or indirectly through a connected person (a “trustee benefit”); or
  • a trustee’s duty to the trust may compete with a duty or loyalty they owe to another organisation or person (a “conflict of loyalty”).

Under the DfE model articles, the trustees may allow a trustee benefit where:

  • the sum is reasonable;
  • the trustee is absent when the benefit is discussed and is not counted in the quorum;
  • the trustee does not vote on the trustee benefit;
  • the trustees are satisfied it is in the best interests of the trust;
  • there is a written record of the reason for the trustees’ decision; and
  • a majority of the trustees haven’t received the same benefit.

They may also allow a member to benefit as a beneficiary and to receive payment for goods or services, rent for premises and interest on a loan where the sum is reasonable and the trustees are satisfied it in the interests of the trust. Again, the trustees must keep a written record of the reason for their decision.

Meanwhile, the DfE model articles define connected persons as including:

  • any company in which the trust holds more than 50% of the shares, controls more than 50% of the voting rights attached to the shares or has the right to appoint one or more directors to the board (e.g. a trading subsidiary);
  • any child, stepchild, parent, grandchild, grandparent, brother, sister or spouse of the trustee or any person living with the trustee as their partner;
  • any firm or company in which the trustee is a partner, employee, consultant, director, member or shareholder (unless the shares are in a public company listed on a recognised stock exchange and less than 1% of the issued capital).

A conflict of loyalty includes:

  • a competing legal obligation or duty to another organisation or person;
  • a loyalty a trustee owes or may feel towards family, friends or others;
  • religious, political or personal views.

Where a trustee is elected or appointed by a connected person (such as a sponsor, foundation or diocese), they must therefore act only in the best interests of the trust.

What must trusts do?

The fact that conflicts of interest can arise doesn’t mean trustees mustn’t have other interests or that people should be discouraged from becoming a trustee. Quite the opposite. Trustees’ personal and professional connections can benefit a trust from their wider insights in the sector and society. The question is ‘how must interests be managed to avoid any conflict of interest?’. The above Charity Commission guidance helpfully identifies the following 3 stage process which trustees must follow. The process should also be followed by members and local governors.


The Charity Commission expects trustees to identify conflicts of interest at an early stage and have the declaration of conflicts of interest as an agenda item at the start of each meeting. The DfE model articles also require a trustee who has or can have a conflict of interest to disclose that fact to the trustees as soon as they become aware of it.

If a trustee is aware of an undeclared conflict of interest affecting another trustee, they should notify the other trustees or the chair.

Prospective trustees should also be asked about potential conflicts of interest to identify any serious or frequent conflicts that would seriously question their appointment


Trustees must consider any conflict of interest to prevent any potential effect on their decision making in the best interests of the trust.

In more serious cases, trustees should consider removing the conflict by:

  • not pursuing the course of action;
  • proceeding in a different way (e.g. not using the trustee or their company);
  • securing the resignation or removal a trustee; or
  • not appointing a trustee.

Serious cases include where:

  • conflicts of interests are present in significant or high risk decisions;
  • there is inappropriate trustee benefit;
  • trustees cannot act because a majority are conflicted on a particular issue;
  • a large number of trustees have conflicts of interests (e.g. where several trustees, or their connected persons, have links with each other);
  • the interests of one or more trustees are regularly in competition with the trust.

Where trustees wish to proceed without removing the conflict of interest, they should consider obtaining independent advice, appointing additional trustees (who are not conflicted) to help decide the issue, and avoiding the appointment of other conflicted trustees.

Whatever the nature of the conflict of interest, the DfE model articles require trustees to always absence themselves from any discussion of the trustees where it is possible a conflict of interest will arise with their duty to act solely in the interests of the trust. They must not be counted when calculating the quorum for that part of the meeting.


Trustees should also maintain a written record of any conflicts of interest showing:

  • the nature of the conflict;
  • which trustee or trustees was/were affected;
  • whether any conflicts of interest were declared in advance;
  • an outline of the discussion;
  • whether anyone withdrew from the discussion; and
  • how the trustees took the decision in the best interests of the trust.

This will help trustees show they have acted properly and in the best interests of the trust.

Meanwhile, the Handbook requires trusts to have an up-to-date register which identifies:

  • the relevant business and pecuniary interests of members, trustees, local governors and senior employees; and
  • the relevant material interests from close family relationships between members, trustees or local governors and between those individuals and employees.

The trust’s website must include the relevant business and pecuniary interests of their members, trustees, local governors and accounting officer. Trusts can decide whether to publish other interests but need to be transparent and able to explain their decision.

What could go wrong?

If trustees don’t manage conflicts of interest in the best interests of the trust, the consequences can be wide-ranging and potentially terminal for the trust.

Alongside the inevitable damage to the relevant trustee, the trust’s reputation and public trust and confidence in the trust, the sector and charities generally, trustees will need to take remedial action to ensure the situation doesn’t recur.

In more serious cases, trustees risk making decisions that are invalid or open to challenge by interested parties such as staff, unions, pupils, trusts, schools and suppliers. Trustees may have to repay sums paid by the trust, even where the trust has benefitted, and make good any loss suffered by the trust. The Charity Commission may also take enforcement action at the request, or with the consent of the DfE, such as suspending or removing a trustee or employee or directing specified action, including disqualifying an individual from acting as a trustee and as a company director for a period of years. However, the ESFA will more likely investigate and, depending on circumstances, issue a Notice to Improve and re-broker the trust.

What more should trusts do?

Conflicts of interest policy

To help identify, prevent and record conflicts of interest, trusts should have a conflicts of interest policy. The policy should:

  • define conflicts of interest;
  • explain that trustees have a personal responsibility to declare conflicts of interest;
  • confirm what the trust’s articles say about conflicts of interest;
  • define all interests that trustees should declare;
  • define trustee benefits and highlight the requirement for prior approval;
  • include guidance on the procedures to follow;
  • set out how and by whom the policy will be monitored and enforced;
  • be widely communicated and understood within the trust; and
  • be part of a wider policy framework, such as a trustee handbook, and reference all relevant codes of conduct and policies the trustees must follow.

The policy should also apply to members and local governors and be regularly reviewed and updated.

Meeting agenda

It is common practice for trustee meetings (including sub-committees) to have a standing agenda item asking trustees to declare any conflict of interest, both in relation to matters to be discussed at that meeting but also as a reminder for a more general declaration.

Similarly, consideration should be given to whether a meeting is properly quorate, which considers not just whether there is a sufficient number of trustees present for a valid meeting to start, but also that there are sufficient non-conflicted trustees to reach a decision on the matters to be discussed.

Governance reviews

Trustees should also regularly review their trust governance to ensure conflicts of interest are managed effectively and in the best interests of the trust and key regulatory requirements are complied with. The Handbook emphasises the value of an objective external review of governance and the strong DfE preference that external reviews are conducted routinely. Our governance review service assesses both effectiveness and compliance and reports on our findings. If you would like more information, do get in touch.


Conflicts of interest continue to be an issue for trusts and are something the ESFA will always take a keen interest in given the risk to public funds, trust and confidence in the sector and the DfE ambition of strong multi academy trusts for all schools. However, there are clear steps that trusts can and should take to manage conflicts of interest and safeguard their success and the interests of their pupils and communities.

If you would like to discuss any aspect of this article further, please contact Graham Shaw  on 0113 244 6100.

You can also keep up to date by following Wrigleys Education on Twitter here

The information in this article is necessarily of a general nature. Specific advice should be sought for specific situations. If you have any queries or need any legal advice please feel free to contact Wrigleys Solicitors




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Graham Shaw


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