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- Rescue
- Recovery
- Insolvency
Email David Kirk direct by clicking on his name.
Privately run and owned schools can be very profitable but can lose money quickly if they drop below the critical level of break-even pupil numbers. Schools have been faced with a number of challenges recently, including VAT applied to school fees, paying full business rates and an increase in the contribution to the teachers pension scheme from 23.68% to28.68%.
Schools are often limited companies and overseen by volunteer unpaid governors. The governors may rely on the school being a limited company but personal liability can arise if the governors do not make good decisions about the schools finances. The biggest risk for governors is being a loss making school and allowing the finances to get worse over an extended period of time so that creditors cannot be paid in full, if the school closes.
A school usually has a very large overhead in teachers wages and pensions and some long serving staff who have built up considerable redundancy rights over several years.
A school can find it very difficult to shrink down the staff numbers without it using all up all the remaining cash flow in paying those staff off. Redundancy costs can be substantial. If the school owns the freehold of the building it can also mean the property is worth a lot more as an open operating school than an empty boarded up building. Schools do not have easy alternative uses without a lot of development costs.
One solution is to recognise that liquidation is probably the right answer if the school can not be sold and close down. Liquidation allows the Government Redundancy Payment Service to step in and pay arrears of wages, holiday pay, notice pay and critically redundancy pay.
We have dealt with a number of schools and know the pitfalls the directors can face if they keep going too long including taking fees in advance from parents but not being able to deliver the education that has been paid for.
Other issues for schools are exam grading, safeguarding and keeping the records safe for all students. The safe keeping of student data is a very important issue.
Early professional advice is key to make sure the directors are not liable for wrongful trading.
Please do contact me if you have any questions. You can do this by email if you prefer. We deal with charities based in England and Wales. My direct email is at the very top of this web page.
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Licensed Insolvency Practitioner