Consultation on Developing an Insolvency Regime for the Further Education and Sixth Form Sector

Overview

This consultation seeks comments on proposals to introduce procedures for further education and sixth form colleges which become insolvent (unable to pay their debts). The proposals include a Special Administration Regime which would give extra protection to ensure continuity of service.

The insolvency regime would be designed to:

• Protect learners from disruption to their courses
• Help the rehabilitation of the college, where possible
• Provide an orderly winding up procedure if a college becomes insolvent

We are proposing insolvency procedures for colleges in line with those provided for companies under the Insolvency Act 1996, including administration and liquidation, as well as a Special Administration Regime.

We are also publishing the draft clauses alongside the consultation. Whilst these are very early drafts that are subject to change in response to consultation feedback we think that they provide useful detail for stakeholders on a technical area of policy.

Why your views matter

It is currently unclear whether insolvency law relating to compulsory winding-up currently applies to colleges. If it does, it would be possible for a college to be wound up by the court. However, this is untested; and in any event would not provide the range of procedures that would offer flexibility for colleges and their creditors or protections for their learners.

In the scenario where a college becomes insolvent this uncertainty would create the risk of disorderly closures and potential detriment for learners as their courses are interrupted or terminated. It could also lead to potential adverse outcomes for creditors and the taxpayer, who may be asked to provide ongoing emergency funding.

We are consulting on proposals to end this uncertainty.

What happens next

We are currently reviewing the responses received. A government response will be published in due course.