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My School Is Insolvent – What Should I Do?

The quick answer

If your school is losing money or has other problems affecting it then you need to consider your possible options. These are likely to include:

  1. Close and liquidate the school – this stops losses and lets the Government fund be called upon to pay employees.
  2. Find a new owner and transfer the school.
  3. Raise more funding to keep the school going or sell assets. 

Schools often face problems from falling pupil numbers which can take them below break even. in rarer cases they may have issues with Ofsted (Office for Standards in Education) who can very quickly remove a school’s ability to carry on. 

In more detail

The common problem issues for schools with financial problems are:

  1. They will have high numbers of  skilled and well paid staff and the redundancy costs of trying to restructure the school can be prohibitive.
  2. Pupils may have been paying school fees in advance (so the school owes parents money).
  3. The disruption of ending a term early and having all of the pupils moved to other schools plus the liability for breach of contract to the parents.
  4. The confidentiality of school records and school data.
  5. Keeping all the assets secure.

The other issues that are particular to schools are that they may have been run as charities or companies Limited by Guarantee which both present their own problems that we are used to dealing with.

It is better to call in someone qualified like us at an early stage to understand the schools realistic financial options and to help come up with a contingency plan if it does all go wrong.

We can also act as a neutral independent barrier between the employees, parents and school owners. Often in these situations emotions run high.

 

The options may be:

Some of the options will be:

  • To try and refinance the school with a loan whilst the school is closed down or sold.
  • Closure and liquidation. One advantage to liquidation is the UK Government Redundancy Payments Service will step in and pay redundancy, arrears of pay, holiday and notice pay.
  • Administration and some kind of rescue of the school usually by the sale to a new owner. Administration has the advantage of being very quick and it protects a school in trouble from any creditor action.

We have dealt with a number of insolvent schools (and insolvency by definition can mean being unable to pay your debts as they fall due) and have the experience and knowledge to be able to help.

We can advise the school trustees and directors on what they should do to reduce the risk of wrongful trading and a later claim for misfeasance.

Download our Schools & Insolvency Brochure

tip

If you need insolvency advice the earlier you talk to someone like us the better as you will have more options. We can help, contact us today.
We have just worked with Kirks to complete the closure of our company. Everything went smoothly and professionally. I would recommend this firm and the staff who were very very helpful and quickly finalised everything. Thank you Kirks.
Carol Hill

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David Kirk Portrait

David Kirk

Licensed Insolvency Practitioner