Insolvency regime for colleges: ICAS response

david-menzies By David Menzies, ICAS Director of Insolvency

9 August 2016

ICAS has published its response to the UK Government consultation to create a special insolvency regime for colleges.

ICAS has broadly welcomed proposals from the UK Government relating to the insolvency regime for further education and sixth form colleges in England.

The UK Government consultation at the beginning of July set out proposals to clarify a legal uncertainty over whether insolvent colleges would fall within the scope of the Insolvency Act 1986 and to create a special insolvency regime, Education administration. This would prioritise the protection of learners from disruption to their courses over the normal insolvency purpose of maximising a return to creditors.

In responding to the consultation, ICAS has highlighted that the need for such a special insolvency regime is a decision based on political and societal objectives and as such no views are given on this proposal.

ICAS agrees that absolute clarity is required over the manner in which an insolvent college can be dealt with and whether the procedures within the Insolvency Act 1986 can be applied to colleges.

Where an Education administrator is appointed to a college, the primary purpose of the administration would be to protect learners from disruption to their courses. In such circumstances, ICAS has highlighted that the administrator continuing to operate the college would require cost underwriting from Government in order to ensure that creditors were not unfairly disadvantaged from the use of the special insolvency regime.

The response also highlights that public trust in the sector needs to be maintained through effective accountability of college governors. They should therefore be subject to the same remedies for pre-insolvency behaviour and potential disqualification as directors of companies.

In acknowledging that education is a devolved matter, ICAS has also called for discussion with the Scottish Government to explore whether there would be benefit in extending the scope of the proposals to the FE sector in Scotland.

Download: ICAS consultation response PDF [245 KB].

Topics

  • Consultations and responses
  • Insolvency

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