Insolvency in the Further and Higher Education Sector

Produced in partnership with Neil Smyth of Mills & Reeve and Morgan Bowen of Mills & Reeve

Practice notes

Insolvency in the Further and Higher Education Sector

Produced in partnership with Neil Smyth of Mills & Reeve and Morgan Bowen of Mills & Reeve

Practice notes

This Practice Note summarises the Insolvency regime introduced by the Technical and Further education Act 2017 (TAFEA 2017), the Further Education Bodies (Insolvency) Regulations 2019 (FEBR 2019), SI 2019/138 and the Education Administration Rules 2018 (EAR 2018), SI 2018/1135 which came into force on 31 January 2019.

TAFEA 2017 sets out the framework of an insolvency regime which applies to further education and sixth form colleges in England and Wales.

It also introduces a special administration regime which is aimed at protecting the interests of learners at an insolvent college.

Background

The Further and Higher education Act 1992 (FHEA 1992) introduced a new further education Sector providing for full time education for 16–18 year olds as well as a new form of corporate legal entity known as a ‘further education corporation’.

According to the Association of Colleges, over 95% of colleges in the sector are either a further education corporation or a sixth form college corporation established under FHEA 1992.

The Education Act

Neil Smyth

Partner, Mills & Reeve

Neil helps businesses and individual clients on all issues arising from financial distress. He advises clients on how to deal with their own financial distress; lenders, investors, private equity, venture capitalists and various other stakeholders on the financial distress of their borrower or investment; clients on the financial distress of counterparties and insolvency practitioners on insolvency process issues.

Neil is editor of Recovery magazine for R3 and regularly presents for R3 and various other organisations on restructuring and insolvency issues.

Morgan Bowen

Senior associate, Mills & Reeve

Morgan has over 17 years’ experience advising directors, creditors, insolvency practitioners, investors and other stakeholders at all stages of the decline and recovery curves across multiple sectors. This includes advising on directors' duties on insolvency, distressed asset sales/purchases, restructuring solutions, advice on security enhancement, insolvency investigations and litigation, and mitigation of future insolvency risk in transactions.

Morgan has extensive experience across multiple sectors, including healthcare, real estate, financial services and construction.

Jurisdiction(s):

United Kingdom

Key definition:

Insolvency definition

What does Insolvency mean?

This can be defined by two alternative tests (Insolvency Act 1986, s 123):

• cash flow test: a company is solvent if it can pay its debts as they fall due, no matter what the state of its balance sheet (Re Patrick & Lyon Ltd [1933] Ch 786);

• balance sheet test: a company which can pay its debts as they fall due may be insolvent if, according to its balance sheet, liabilities (including contingent liabilities) exceed assets.

Insolvency in the Further and Higher Education Sector

Produced in partnership with Neil Smyth of Mills & Reeve and Morgan Bowen of Mills & Reeve