Active Stocks
Fri Apr 12 2024 15:57:45
  1. Tata Steel share price
  2. 163.50 -1.00%
  1. NTPC share price
  2. 362.00 -0.32%
  1. ITC share price
  2. 430.10 -1.56%
  1. HDFC Bank share price
  2. 1,518.90 -1.10%
  1. State Bank Of India share price
  2. 766.75 -1.57%
Business News/ Opinion / First Person/  Establishing a foreign K-12 school in India
BackBack

Establishing a foreign K-12 school in India

If more foreign schools show interest in India, the Indian government may find merit in having a separate set of legislation to allow setting up of foreign K-12 schools in the country

It is imperative that foreign schools focus on getting their India entity structure right. A faulty structure could have implications for these schools, significant enough to impact their brand and reputation. (File Photo: AP)Premium
It is imperative that foreign schools focus on getting their India entity structure right. A faulty structure could have implications for these schools, significant enough to impact their brand and reputation. (File Photo: AP)

There is no dearth of data to support the need for good quality K-12 education in India. The government’s focus on skilling, employability and holistic multidisciplinary education has only upped the demand for better schools in the country. There has been significant uptick in international curriculum schools across the nation in recent years, despite much higher fees compared to domestic boards. This is mainly due to better quality of teaching-learning and learner skills.

This presents an unique opportunity for foreign schools to establish their presence in India as they can play an important role in shaping K-12 education in the country.

While some foreign schools have already entered India, there is an opportunity for many more. However, it is imperative that foreign schools focus on getting their India entity structure right. A faulty structure could have implications for these schools, significant enough to impact their brand and reputation. Further, undoing a structure is never easy, making the situation more complex.

There are some structures that have been used in the past. The first and potentially the most important one is a licencing and services arrangement between a foreign school operator and a domestic Indian partner. Under this arrangement, the responsibility of all local compliances – including setting-up of the school, infrastructure, obtaining/ maintaining all permissions, as well as day-to-day operations – is vested with the local Indian partner. The foreign school operator licences its brand, curriculum and sometimes expert services (such as teacher training, etc) to the Indian partner. Payments are made by the Indian partner to the foreign school operator in a structured manner, subject to compliance with the Indian tax laws and exchange control regulations. This option can be used to give the foreign school operator an ability to exercise quality control over the functioning of the school in a variety of ways, which can be documented by way of robust agreements.

This option takes various forms, including that of a franchise arrangement, collaboration arrangement, strategic partnerships, pathways arrangement, etc. Each model has specific nuances from a commercial, legal, regulatory and tax perspective. What is key in such deals is to have a clear understanding of processes, compliances, brand-use related terms, termination and processes of disengagement so as to not jeopardise the interest of the students studying in the school.

Other structuring options include collaboration arrangements for specialised programmes, summer schools, student exchange programmes, joint research initiative, etc. Some foreign schools have already explored these options and have benefitted from them.

While the options appear simple on paper, education in India is heavily regulated (at the federal and state level). Hence, it is important to analyse each model carefully, document the understanding properly, and then proceed cautiously.

Further, with India opening its doors to foreign universities and allowing them to set up campuses here (currently allowed in GIFT; pan-India regulations are awaited), a question arises on whether foreign schools can also set-up campuses in the country.

Whilst there is no legal bar, the nature of the regulatory environment is such that many issues will need to be considered and addressed before moving in this direction.

Key Points

Every Indian state has its own education law, imposing several regulatory and compliance requirements on schools. There are federal laws as well, including the Right of Children to Free and Compulsory Education Act, 2009.

A school, in most Indian states, can only be set up by a not-for-profit entity (public charitable trust, society or a Section 8 Company – i.e. a company with charitable objects). While setting up a charitable entity is not a big task, there are regulatory and practical challenges in foreign residents becoming a member of/ controlling charitable entities set up in India.

Setting up a school is capital-intensive. Although foreign direct investment in education is permitted, a trust or a society does not have the ability to receive foreign investments due to foreign exchange laws in India. A Section 8 company can receive foreign investments, as contributions or donations from overseas entities, subject to compliance with provisions of Foreign Contribution (Regulation) Act, 2010 (“FCRA"). However, the FCRA nod is not always forthcoming and getting it is a rather cumbersome task. Recently, the government has also revoked a number of permissions granted to charitable entities.

Repatriation of funds from a not-for-profit entity is complex and will require prior approvals from the Reserve Bank of India.

To set up a school, several local level permissions are required, including permission from the local state education department to open a school, meeting minimum land and infrastructure commitment, obtaining safety permits relating to school premises, etc. Meeting the regular compliance requirements (such as no-objection certificates from fire department, etc.) is not for the faint hearted.

Once a school is set up, there are several compliances that need to be met on an ongoing basis. Many states in India now have state-specific fee regulation laws (which set out the process to determine school fee), among other obligations under other applicable laws. Such laws may have an impact on pricing of schools. A lot of time and energy will have to be invested in ensuring that compliance requirements are taken care of as any slip-up can have serious consequences.

Therefore, a partnership with an Indian operator should be the preferred route to set up foreign schools in India. At least till Indian laws specifically facilitate foreign schools to set up campuses in the country. India is relaxing its laws to allow foreign universities to set up campuses in the country. If more foreign schools show interest in India, the Indian government may find merit in having a separate set of legislation to allow setting up of foreign K-12 schools in the country.

Vivek Kathpalia, MD & CEO, Cyril Amarchand Mangaldas - Singapore; and Aarushi Jain, Partner & Head – Media, Education, & Gaming, Cyril Amarchand Mangaldas.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 09 Aug 2023, 03:33 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App