Rescue, Recovery, and Closure Options for Education Companies

There have been clear and widespread changes in how education is delivered in recent years, particularly with the accelerated move towards online learning. As online learning becomes more common, it’s expected that traditional face-to-face learning may mainly be reserved for subjects that require practical elements.

This shift has the potential to diminish the advantages of residing on campus in student accommodation, which often incurs a high financial expense for students. However, it serves as a valuable source of revenue for universities and private schools that offer such facilities.

How to close your education company via the liquidation process? 

Depending on the financial state of your university, college, or educational institution, you might be wondering if liquidation could be the optimal solution for your current challenges. 

Although liquidation is typically a final option, for entities that have become insolvent with minimal chance of recovery, it might be the most suitable course of action for all involved.

There are two primary methods for liquidating an insolvent company. Like: 

  • One is via compulsory liquidation, where a creditor compels the company to close down.
  • Alternatively, the directors of the insolvent company can start the liquidation process themselves. Voluntary liquidation is executed through a Creditors’ Voluntary Liquidation (CVL), overseen by a licensed insolvency practitioner.

The primary objective of a CVL is to orderly shut down an insolvent company. Throughout the process, all company assets are identified, independently valued, and then sold. The proceeds are distributed among creditors following a specific hierarchy outlined in the Insolvency Act 1986.

During this period, the appointed insolvency practitioner will be responsible for communicating with creditors. In the event of a school undergoing liquidation, they will also handle interactions with parents of students, who may be experiencing heightened emotions.

Once the business assets have been liquidated and distributed accordingly, the CVL process concludes with the removal of the company’s name from the register at Companies House. Consequently, the company ceases to exist as a legal entity.

The liquidation of any company requires careful and thoughtful handling, but it becomes even more crucial when dealing with the liquidation of an educational institution. 

It’s imperative to safeguard the ongoing education and future prospects of enrolled students during this process.

In numerous instances, once a company becomes insolvent and initiates a liquidation process, it must cease operations immediately to safeguard creditors from additional losses. Nevertheless, the closure of an educational institution must be meticulously handled to safeguard the interests and well-being of students.

If you’re considering liquidating your university, college, or independent school, it’s crucial to seek advice promptly from a licensed insolvency practitioner. They can provide guidance tailored to your situation as an educational institution.

Unlocking effective ways to rescue your college, university, or other educational establishment

Depending on the magnitude of your existing financial concerns and their underlying causes, there exists a variety of business rescue and recovery options that could potentially reverse the company’s fortunes. 

The solutions available can range from formal to informal approaches, with the most suitable option for your school or university depending on the level of support and intervention needed to facilitate its recovery.

If your financial challenges are temporary, engaging in negotiations with creditors could aid in managing cash flow during periods of reduced income, enabling your school to remain operational. This can be achieved through informal dialogues with creditors or through a formal insolvency process called a Company Voluntary Arrangement (CVA).

A CVA can be suggested to creditors by a licensed insolvency practitioner, who will evaluate your school’s liabilities and establish a feasible monthly repayment amount. The primary goal is to reduce monthly expenses to a sustainable level while ensuring creditors receive a satisfactory portion of the debt.

A potential challenge with a CVA is that at least 75% (by value) of your creditors must agree to its implementation. Typically, a CVA lasts between 3 to 5 years, with creditor contributions distributed over this period. 

Hence, you must show creditors that your company possesses long-term viability and can sustain the proposed payments throughout the CVA period. If creditors doubt this, your proposal might be declined, prompting the need to explore alternative methods of company rescue.

One alternative may involve placing your school or university into an administration process. The administration is especially appropriate for companies facing creditor pressure or potential litigation. 

Once a company enters administration, it receives a moratorium protecting it from winding up petitions or other legal actions that could lead to compulsory liquidation ordered by the court.