For those investors and international school operators looking at the K-12 sector in Dubai recently, the investment landscape has been in a state of flux. Recent developments with the Government of Dubai Knowledge and Human Development Authority (KHDA) was a topic at a round table dinner that Clyde & Co hosted earlier this month, details of which are also in this newsletter.
Having advised on the K-12 sector across the region for the length of time that we have, we believe that KHDA is a very progressive and responsive school regulator in the MENA region, constantly striving to protect pupils and parents and ensure a high quality of education. A number of high profile examples of international school “franchises” being withdrawn around the wider region prompted KHDA to specifically look at this practice in Dubai, evaluate perceived risks and consider how best to prevent or mitigate those risks.
KHDA’s current approach
KHDA’s ultimate aim is to ensure that the governing bodies of international schools are committed to the operation of schools in Dubai that share the name and branding of the home school and ensure that the quality of education provided to pupils is not less than that offered in the home school. The majority of schools in the region operating under the brand of an international school are owned by investors or developers who are not educators. As a result, KHDA naturally wants to ensure that the governing body of the international school is responsible for education standards.
Clyde & Co have been working closely with investors, school operators and the KHDA to develop an approach to international schools that satisfies all stakeholders. We are very pleased to announce that as a result of our discussions with KHDA, schools in Dubai sharing the name and branding of international schools will not be required to be wholly owned by the international school operator. School operators and their investors are free to establish investment structures to suit their respective needs.
The governing body of the international school will now be expected to provide comfort to KHDA that it will take responsibility for the education standards of the Dubai based school.
The requirements, we understand, that KHDA will seek to impose on the international governing body include (i) undertakings to be fully responsible for the development and submission of the academic plans and curriculum for the proposed school in Dubai, (ii) to demonstrate the ability to deliver high-quality education and an understanding of how this should be adapted to Dubai market conditions, (iii) undertakings to ensure that the Dubai school’s approach to class size, teacher ratios and its policies (such as HR, management and student policies) are in line with the home school, and (iv) obtaining prior approval from KHDA on any change in the status of the Dubai school, including its closure.
The list of requirements is intentionally high level and is for the school operator and its partners to determine how it is implemented in practice.
Previous considerations by KHDA
One concept mooted by KHDA earlier last year (and ultimately decided against) was the possible introduction of a ‘shared management model’ and a ‘branch school model’ for international schools and investors partnering with international schools to follow when establishing K-12 schools in Dubai.
Under the ‘branch school model’, the international school operator was required to own 100% of the school if it was to use the name and branding of the home school. Investors were restricted from owning equity in the school operating company and instead were expected to be involved solely in the commercial arrangements of the school through a property company which would lease the land, building and provide finance.
This raised a number of concerns from both school operators (many of whom were UK charitable trusts concerned with liability issues and facing restrictions on the funding of oversees campuses) and investors (who were expected to fund the land acquisition, construction and operational costs of a school without being able to take the usual level of security over the school).
The ‘shared management model’ allowed investors to own up to 100% of the Dubai school. These schools however were prohibited from using the brand, logos and ‘other collateral’ of the international school. Again, this raised a number of concerns from both school operators and investors, given that the value in the school was largely based on the international school’s brand and reputation.