South London’s controversial Durand Academy will have its funding agreement terminated and be handed to a new sponsor in 12 months, the head of the Education Funding Agency has said.

Peter Lauener, the EFA’s chief executive, has written to Sir Greg Martin, chair of the Durand Academy Trust, to confirm that its funding will be cut off on June 29, 2018.

This means that a new sponsor will be found by government officials for the Lambeth school, and its existing trustees will be dismissed.

It follows a long period of negotiation between the government and the school, which was given a final warning last autumn after it refused to sever ties with Martin, its former highly-paid executive headteacher.

Lauener said the funding termination follows “repeated and significant breaches” of the academy’s agreement that “have not and will not be remedied to my satisfaction”.

The trust was told last July to address concerns over finances and potential conflicts of interest and sever ties with Martin, who has previously faced criticism from MPs after it emerged he was paid more than £400,000 in salary from the school and management fees from a company which ran leisure facilities on its site.

Schools Week revealed last September that the trust had refused to meet the demands and vowed to fight any termination in court, claiming the EFA had “no right” to ask for the changes to be made.

In October, the EFA issued Durand with a notice of intention to terminate its agreement, claiming the trust has failed to comply with six of eight requirements set out in an earlier warning.

Most of the government’s original demands related to the structure of the trust and conflicts of interest surrounding its association with several other organisations.

They included Durand Education Trust, which owns land occupied by Durand Academy in Lambeth and has been under investigation by the Charity Commission, and London Horizons Limited, which runs the school’s leisure facilities on a commercial basis.

The conditions also sought to sever all links between the academy trust and Martin, who was told to resign as chair, leave the trust’s board entirely and vacate “any other position” within the academy trust, but did not do so.

Lord Nash, the academies minister, said the decision had not been “taken lightly”, but followed “multiple breaches by the trust of its funding agreement and a failure to meet, or refusal to comply with, the requirements set out by the department to address concerns about financial management and governance”.

“DAT has been given multiple opportunities to respond to our concerns but has failed to do so,” he said.

“We will now begin the process to transfer the school to a new sponsor to safeguard the future education of Durand’s pupils and to ensure public money and public assets intended for the education of children are managed effectively.”

The government says a 12 month transitional period will now begin, with handover arrangements made ahead of next June to “ensure minimum disruption to pupils”.