(a) Restriction on serving. A person may not serve as a member of the governing body of a charter holder as a member of the governing body of a charter school, or as an officer or employee of a charter school, if the person has a substantial interest in a management company that has a contract for management services with the charter holder or a charter school. A person has a substantial interest in a management company if the person:
  (1) has a controlling interest in the company;
  (2) owns more than 10% of the voting interest in the company;
  (3) owns more than $25,000 of the fair market value of the company;
  (4) has a direct or indirect participating interest by shares, stock, or otherwise, regardless of whether voting rights are included, in more than 10% of the profits, proceeds, or capital gains of the company;
  (5) is a member of the board of directors or other governing body of the company;
  (6) serves as an elected officer of the company; or
  (7) is an employee of the company.
(b) Management company as officer. Notwithstanding subsection (a) of this section, a person who has a substantial interest in a management company may provide management services that include the functions of a central administration officer, campus administration officer, or business manager, if:
  (1) the person provides all management services under a contract for management services;
  (2) the person provides all management services as an agent of the management company;
  (3) the person does not serve as an employee or volunteer of the charter holder or charter school, and does not otherwise serve as a contractor of the charter holder or charter school;
  (4) the person does not serve as a member of the governing body of the charter school or charter holder; and
  (5) the management services provided by the person do not include powers or duties that are non-delegable under §100.1101 of this title (relating to Delegation of Powers and Duties).
(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 and Federal Funds), all persons listed in subsection (a) of this section with a substantial interest in a management company as defined by subsection (a).
(d) Removal by charter holder. If a person is prohibited by this section from serving as a member of the governing body of a charter holder, as a member of the governing body of a charter school, or as an officer or employee of a charter school, the charter holder shall remove the individual from such position immediately.
  (1) The removal must be made in accordance with the removal provisions in the articles of incorporation and bylaws of the corporation, if applicable, the terms of the open-enrollment charter, any applicable local policies, and state and federal law.
  (2) The governing body of the charter holder may not approve an account or draw or authorize the drawing of a warrant or order to pay the compensation of a person if the person is prohibited by this section from serving in the capacity for which compensation is due.
(e) Implementation schedule and transition. Notwithstanding this section:
  (1) beginning with the fiscal year in which September 1, 2001, falls, a charter holder shall separately disclose, in its annual audit report required by §100.1047(c) of this title, all persons listed in subsection (a) of this section with a substantial interest in a management company as defined by subsection (a); and
  (2) if a person is prohibited by this section from serving as a member of the governing body of a charter holder, as a member of the governing body of a charter school, or as an officer or employee of a charter school, and if removing such person would violate an employment or other written contract that was executed prior to September 1, 2001, then the employment or other contract 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 person under the employment or other contract, and all such amounts are paid from a clearly identified source of non-state funds;
    (B) the terms of the employment or other contract have not been renewed, modified, or otherwise altered since September 1, 2001; and
    (C) the person does not perform, and is not charged with performing, any charter school functions.

Source Note: The provisions of this §100.1153 adopted to be effective April 18, 2002, 27 TexReg 3110; amended to be effective September 12, 2012, 37 TexReg 7097