How to liquidate your Education Company
The education sector in Scotland is fundamental in helping individuals and society as a whole to develop and prosper. Educational institutions from early years to colleges and universities face severe challenges that could jeopardise this outcome, however.
Financial difficulties arising from increased costs and changing needs within the sector can quickly lead to insolvency and potential liquidation for education providers. So what are the challenges facing the Scottish education sector in more detail, and can they be overcome?
Challenges facing the education sector in Scotland
Rising costs of delivering education programmes
Energy is a non-negotiable outgoing for educational establishments and the soaring cost of electricity and reduced options for fixed tariffs in recent years may adversely affect their ability to provide the quality education they aim for.
Shortage of teachers
Unmanageable workloads and workplace stress are leaving some education institutions struggling to recruit teachers and support staff. This can leave them with fewer resources and delivering education programmes to larger class sizes.
A changing higher education sector
With more emphasis now on technical and vocational qualifications, to prevent financial decline universities may have to invest in better facilities to attract new students or enter into new partnerships with local colleges.
What does liquidation mean for Scotland’s education sector?
Liquidation means that a business’s assets are sold and it closes down permanently. There are two types of liquidation, one for insolvent businesses that are unable to pay their bills and another for those that are solvent.
Creditors’ Voluntary Liquidation (CVL) for insolvent education businesses
Creditors’ Voluntary Liquidation is designed to prevent any further financial loss for creditors once a company has entered insolvency. It’s a formal process that ensures the business closes down appropriately but it can also protect company directors from allegations of wrongful trading.
All of the business’s assets are realised by the liquidator who then uses the proceeds to repay creditors as much as possible. One notable aspect of entering CVL is that directors may be eligible to claim statutory redundancy pay if they’ve worked under a contract of employment as well as being a director.
Members’ Voluntary Liquidation (MVL) for solvent businesses
Members’ Voluntary Liquidation is typically an appropriate procedure for closing solvent businesses in the education sector if they have retained profits of £25,000 or more to distribute.
Distributions from an MVL are subject to Capital Gains Tax (CGT) for individual shareholders who may be able to lower their liability further by claiming Business Asset Disposal Relief (BADR).
Is it possible to rescue an insolvent education business?
Even when an educational establishment has entered insolvency, it may be possible to turn it around so that it’s in a healthier financial position for the future. This can be achieved using formal insolvency procedures, such as company administration, which offers a breathing space from persistent creditor pressure.
Scotland Liquidators helps education businesses to close down correctly. We understand the issues experienced in the sector and provide reliable unbiased advice that makes a positive difference.
