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Further Education Colleges and Insolvency

It comes as quite a shock when the main facilities provider for the Public Sector such as Carillion fails. It is a timely reminder that public sector austerity has not ended and the Government has signalled it will not prop up failing concerns however vital to delivery of public services. 

At Schofield Sweeney we have a significant Education Practice and it is worth mentioning we have given insolvency advice in the public/private arena and advised on recent mergers brought about by funding issues. We have also seen activity in the Charity sector which has similar issues and concerns. 

The government has just issued a consultation into the insolvency regime for further education and sixth form colleges. Currently no insolvency regime applies, as this was not considered as part of the establishment of these institutions when they were formed as statutory corporations out of local authority control back in 1992. The Technical and Further Education Act 2017 (TAFEA2017) applies existing insolvency law to FE and sixth form colleges in England and Wales. TAFEA2017 applies the normal insolvency procedures (Company Voluntary Arrangement, administration, creditors’ voluntary winding up, winding up by the court and receivership) and received Royal Assent on 27 April 2017 In addition it introduces the new procedure of education administration which will allow a court to appoint an education administrator to manage the institution’s affairs, business and property with a view to avoiding or minimising disruption to the studies of existing students. The application for the appointment of an education administrator can only be made by the Secretary of State (in relation to institutions in England) or a Welsh Minister (in relation to institutions in Wales). 

The relevant provisions of TAFEA 2017 have not yet been brought into force, and the consultation therefore seeks views on the detail before secondary legislation is published. The consultation will close on 12 February 2018. 

In addition, the government will be providing guidance for governors on their duties and liabilities under insolvency law. The results of the consultation and the response from the Department for Education will be published in spring 2018, and the government’s goal is to have the necessary legislation in force to allow the regime to be in place in late 2018. 

If you come across any FE or Charity issues we are able to bring a considerable amount of expertise and experience to the issues that arise.

For further information or guidance please contact our Restructuring and Insolvency team on 0113 849 4000.

About the Author

Richard Fergusson

Partner

Richard is a partner in the Finance and Restructuring team. He is a licensed Insolvency Practitioner…

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