| (a) Loan prohibited. Neither a charter holder or a charter
school may accept any loan or credit from, or incur any debt to, a management
company that has a contract to provide management services to:
(1) that charter school; or
(2) another charter school that operates under a charter granted
to the charter holder.
(b) Management contract prohibited. A charter holder or charter
school that accepts a loan or credit from, or incurs a debt to, a management
company, may not enter into a contract with that management company to provide
management services to the school.
(c) Audit disclosure. A charter holder shall separately disclose,
in its annual audit report required by §100.1047(c) of this title (relating
to Accounting for State Funds), all loans or credit received or indebtedness
incurred by the charter holder or the charter school to any person or entity
providing management services to the charter school or another charter school
that operates under a charter granted to the charter holder.
(d) Agency review. Compliance with this section shall be reviewed
in conjunction with the review required by §100.1155(c) of this title
(relating to Procedures for Prohibiting a Management Contract).
(e) Implementation schedule and transition. Notwithstanding
this subsection, if the affected management contract was executed prior to
September 1, 2001, and the affected promissory note or other debt instrument
was also executed prior to September 1, 2001, then:
(1) both the management contract and the indebtedness may continue
in effect past September 1, 2001, if each of the following conditions is met:
(A) no state funds are used to pay any amounts due the management
company under the management contract, and all such amounts are paid from
a clearly identified source of non-state funds;
(B) no state funds are used to pay any amounts due the management
company under the promissory note or other debt instrument, and all such amounts
are paid from a clearly identified source of non-state funds; and
(C) the terms of the management contract and the promissory
note or other debt instrument have not been renewed, modified, or otherwise
altered since September 1, 2001; or
(2) the indebtedness may be refinanced after September 1, 2001,
and the management contract may be renegotiated after September 1, 2001, if
each of the following conditions is met:
(A) on or before September 1, 2002, the charter holder and
the management company shall file with the TEA division responsible for legal
services the following:
(i) a copy of each and every contract, promissory note, debt
instrument, agreement or document executed, or in effect, at any time on or
after September 1, 2001, between or among: the charter holder or any of its
charter schools or management companies; the management company or any of
its subsidiaries, parents, affiliates, or related companies; and the lender
or any of its subsidiaries, parents, affiliates, or related companies; and
(ii) additional documents as requested by the TEA division
responsible for legal services during its review under this subsection;
(B) the documents filed under subparagraph (A) of this paragraph
shall establish that, upon approval by the TEA division responsible for legal
services, the management company will not be the lender of any funds, but
will merely act as the guarantor or co-signer on loans totaling an amount
equal to or less than the indebtedness owed by the charter holder to the management
company prior to September 1, 2001;
(C) the documents filed under subparagraph (A) of this paragraph
shall establish that the management company may not take any action in its
capacity as guarantor or co-signer to prevent, deter, or discourage the charter
holder from taking any action respecting the management company under its
contract for management services;
(D) the documents filed under subparagraph (A) of this paragraph
shall establish that the term of the contract for management services between
the management company and the charter holder may not extend beyond the term
of the current contract for charter between the charter holder and the State
Board of Education, and that the contract for management services is renewable
beyond the current term of the open-enrollment charter only through negotiation
and execution of a new contract for management services;
(E) the documents filed under subparagraph (A) of this paragraph
shall establish that the management company may not take any action in its
capacity as guarantor or co-signer to coerce, influence, or encourage the
charter holder to negotiate or execute another contract for management services
under subparagraph (D) of this paragraph; and
(F) the TEA division responsible for legal services finds,
in writing, that the documents filed under subparagraph (A) of this paragraph
meet the criteria specified in paragraph (2) of this subsection, and finds
that any compliance problems concerning the governance and the financial or
other management of the charter holder do not prevent the approval of the
arrangements reflected in the documents.
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