Summary: Foreign K-12 schools are increasingly establishing a presence in India. This article outlines the various legal nuances which are to be considered while setting up a K-12 school in India.
A unique blend of foreign legacy and Indian entrepreneurial and educational spirit, foreign K-12 schools have arrived in India. Although currently limited in number, growing interest reflects both market opportunity and increasing acceptance in the country.
Setting up a school in India, especially a foreign one, is a highly enterprising and nuanced endeavour, which involves several legal considerations.
Firstly, unlike foreign universities, which benefit from a dedicated legal framework for establishing in-country campuses, foreign schools lack specific legislation. Consequently, there is no direct approval process for setting up such schools in India.
Secondly, India does not have a central law governing the establishment and operation of schools. Instead, it has state-specific laws, which are usually detailed and outline wide-ranging matters such as eligibility criteria, land and infrastructure requirements, application and inspection processes, process for permission grant, and ongoing obligations.
Most state laws require schools to be set up by a not-for-profit entity (e.g., trust, society, or company with charitable objects) incorporated in India (and, sometimes, within the state itself). Schools must also secure land, obtain several permits, and maintain an on-ground battery of staff. Moreover, many legal considerations and challenges are attached to the participation of foreigners, including their being appointed to the board of Indian not-for-profit entities, their ability to own land in India, their ability to employ staff in India. etc. Schools must also adhere to a plethora of compliances on an on-going basis.
Without a dedicated regulatory framework and because of the practical and legal challenges associated with the establishment and operations, foreign schools typically choose to collaborate with an Indian partner. This Indian partner is responsible for setting up the school, applying for and obtaining permissions, arranging land, hiring staff, and managing various day-to-day operations under the aegis of the foreign school administration.
Given that operational control largely vests with the Indian partners, it is important for foreign school administrations to clearly understand and be comfortable with their role, powers, and level of control within this entire ecosystem.
This begins with choosing the right Indian partner, ensuring that this collaborator has the capability, willpower, knowledge, means and resources, and commitment to execute the school’s vision and manage the modalities on ground. It is critical for the Indian partner to have adequate financial availability and capacity, considering the legal challenges and significant roadblocks related to overseas funding. It is also important to undertake diligence to understand the partner’s compliance mindset, source of funds, infrastructure facilities, and operational capabilities in order to align with the foreign school’s objectives as well as legal requirements.
Equally critical is deciding on the structure to ensure the success of this partnership. A nuanced step plan should be laid out upfront, including outlining who does what, who maintains the checks and balances, and who has the final authority. This structure must be documented through robust agreements that address the requirements of both parties. For instance, while the Indian partner might need support and would like to obligate the foreign school to provide it, the foreign school might want to limit its liabilities and exposure in India. Such structuring is necessary, specifically when the responsibility to both obtain permissions to set up the school and operate it vest with the Indian partner. This also helps shield the foreign schools’ exposure in India. To give the campus the “foreign” flavour, the Indian school would need to use the foreign school’s name, and possibly their ambience, look, and feel, and curriculum as well. This can be implemented via an intellectual property licensing/usage agreement. Parties may also need services or consultancy agreements to effectively implement the foreign school model in India. Establishing a well-defined governance framework is also of paramount importance for such schools. All these steps and documents must be vetted from a regulatory and legal perspective to ensure compliance.
Tax considerations also play a crucial part. The arrangement between the foreign and Indian school partner needs to be at arms’ length. Parties must also take care to avoid tax issues such as the creation of an association of persons (AOP) and a permanent establishment (PE), which may arise on account of staff movement across countries, deletion of authorities, etc. These considerations often determine how parties assign roles, responsibilities, and control. These steps may seem extensive, but are imperative to ensure an effective India entry and legally compliant operations.