These are likely to include:
- Raise more funding to keep the school going (or sell assets like school buildings on a sale and leaseback).
- Find a new owner and transfer the school.
- Close and liquidate the school – this stops losses and lets the Government fund be called upon to pay employees
Schools often face problems from falling pupil numbers which can take them below a financial break even point. In rarer cases they may have been issues with Ofsted (Office for Standards in Education) who can very quickly remove a school’s ability to carry on.
In more detail
The usual considerations for schools with financial problems facing closure are:
- They have high numbers of well paid and skilled staff and the redundancy costs of trying to close can be prohibitive.
- Pupils will have been paying school fees in advance (so the school owes parents money).
- The disruption of ending a term early and having all of the pupils moved to other schools could create a breach of contract with the parents.
- What happens to historical school records and school data.
- 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
