Education administration – what is it and how is it different?

17 July, 2019

 

Education administration is an insolvency process introduced in January this year that applies to further education (FE) bodies.  The objective of an education administration is to avoid or minimise disruption to the studies of the existing students[1] of the college (referred to as ‘learner protection’), whilst securing the best outcome for creditors.  This differs to a ‘normal’ administration where the underlying primary duty of the administrator is to act in the interests of creditors generally.

There are already several of these special administration regimes in operation to protect continuity of supply in cases of insolvency in other sectors, including social housing, postal services and energy.  Each special administration regime has a special objective that is focused on the supplied service that is to be protected – in the case of an education administration this is the education that is being delivered to existing students.

An education administration commences as a result of a court order on an application by the Secretary of State.  The court may make an education administration order only if it is satisfied that the FE institution is unable to pay its debts or is likely to become unable to pay its debts (i.e. is insolvent or likely to become so).

Insolvency practitioners are appointed from a pre-approved panel to achieve the special objective by:

  • Rescuing the FE body as a going concern.
  • Transferring some or all of its operation to another body.
  • Keeping it going until existing students have completed their studies.
  • Making arrangements for existing students to complete their studies at another institution.

An education administration will not expire automatically after one year (as with normal administration), but will end when the special objective has been achieved.

The company disqualification regime[2] has also been modified to apply to FE bodies that are statutory corporations meaning that governors can be disqualified (both as governors and as company directors) if their conduct in managing the college prior to the insolvency has been unfit.

The first FE institution to be placed into education administration was Hadlow College in Kent, on 22 May (coincidentally the same day that British Steel went into liquidation).  The appointed administrators, BDO LLP, are tasked with overseeing the potential sale or transfer of assets from the Hadlow Group – which includes Hadlow College and West Kent and Ashford College – to colleges in a 30-mile radius.  The appointment followed intervention and a report by the FE Commissioner, Richard Atkins, in February 2019[3], and the actions of the leadership team and several governors, all of whom left their roles following allegations of financial irregularities, will be investigated as part of the administration process.

 

[1] Student who are already in attendance on a course at the college in question, or who have accepted a place on a course at the college, when the education administration order is made.

[2] The Company Directors Disqualification Act 1986.

[3] https://www.gov.uk/government/publications/fe-commissioner-intervention-hadlow-college