As a result of the current economic climate most industry sectors have experienced financial difficulties. All industry sectors throw up their own bespoke problems and issues for the insolvency practitioner on being appointed as administrator. I have recently assisted Christopher Brooksbank of O’Hara’s Limited in a hostile administrator appointment over a private school and nursery which threw up a number of issues to be considered by insolvency practitioners dealing with companies providing such services.
In dealing with companies involved in providing education and/or child care services great regard has to be given to the welfare of the children and their continued education and care. Nurseries and schools are regulated by Ofsted. The Ofsted Regulations are complex and the type of registration that is required to trade varies dependant upon a number of factors.
On being approached to deal with a company in the education/child care industry it is therefore imperative for the insolvency practitioner to contact Ofsted and get an understanding of the registration that is required for the particular company in order to ensure that the business can continue to trade once the company is placed into administration.
With nurseries and schools it is necessary to have an Ofsted approved individual to be in situ to trade. In this particular matter the appointment was by way of a creditor’s application to court and as such it was not clear whether or not the current approved person would be co-operative following the administrator’s appointment. It was therefore necessary for an alternative Ofsted regulated individual to be available to take over the registration if required and for Ofsted to implement emergency measures to enable this to occur.
It is also necessary for the insolvency practitioner to have regard to the timing of the appointment, especially if the application is by way of an in court application. If possible it is advisable to time the appointment during a school holiday in order to minimise the impact on the children. This also provides the insolvency practitioner with a window of opportunity to seek to market the company with as little disruption as possible to the children.
From our experience if the appointment is to take place by way of a hostile creditors application it does not appear sufficient to merely justify the purposes of administration to the Court. The Court wishes to see evidence that consideration has been given to the welfare and education of the children and that measures have been put in place to ensure that the children and their parents will suffer as little disruption as possible by the company’s administration.
In this particular matter we were able to make the application to court during the half term period and provide evidence to the Court that measures were in place if the current regulated individual was not co-operative to ensure that the company could continue to trade. This appeared to satisfy the court and the administration order was granted.
If you are looking at dealing with a company in this sector, planning and forward organisation, including liaising with Ofsted, are key to ensure that the business of the company is maintained whilst the company is marketed and an onward sale is agreed.
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