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Kirsty Williams, Cabinet Secretary for Education

First published:
2 December 2016
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This written statement is laid under Standing Order 30 – Notification in relation to UK Parliament Bills.

It relates to provisions in the Technical and Further Education Bill (the Bill), which will modify the Welsh Ministers’ functions, but do not require a Legislative Consent Motion under Standing Order 29.    

The Bill was introduced in the House of Commons on 27 October 2016. The Bill makes provision for (amongst other things) an insolvency regime for further education corporations (FE Colleges) and companies conducting a designated further education institution (designated institutions).

The Bill can be found at:
http://services.parliament.uk/bills/2016-17/technicalandfurthereducation/documents.html


Policy Objective

The UK Government’s stated policy objective is to introduce an insolvency regime which will ensure the financial resilience of FE bodies. Current legislation provides for the dissolution of solvent FE colleges but there is no provision to deal with insolvent colleges. The Bill sets out proposals for establishing a suitable insolvency regime to provide clarity for colleges and creditors.

The proposed insolvency regime provides for the application of normal insolvency procedures to FE colleges in England and Wales so that insolvent colleges are treated in a similar way to insolvent companies.

In addition, the Bill proposes to create a special administration regime to operate alongside ordinary insolvency with the purpose of protecting learners in the event of a FE college or designated institution (FE bodies) being insolvent.


Relevant provisions in the Bill

The Technical and Further Education Bill makes the following provisions which modify Welsh Ministers’ functions:

Clause 7(3)(a)

The Welsh Ministers are given the function of receiving notice of a person’s application for an ordinary administration order in relation to an FE body.

Clause 9(2)(a)

The Welsh Ministers are given the function of receiving notice of a person’s petition for the winding up of an FE body.

Clause 10(3)(a)

The Welsh Ministers are given the function of receiving notice of an application made by an FE body for permission of the court to pass a resolution for voluntary winding up.

Clause 11(a)

The Welsh Ministers are given the function of receiving notice of intention to enforce security over property of an FE body.

Clause 16

The Welsh Ministers are given the power to make an application to the court for an education administration order in respect of an FE body, and a duty to give notice of such an application to the relevant FE body, and to any other person specified in rules made under the Insolvency Act 1986.

Clause 25 (1) to (3)

The Welsh Ministers are given a power to make grants or loans to an FE body in relation to which an education administration order has been made on whatever terms the Welsh Ministers consider appropriate, including making the grant or loan repayable with or without interest. Those terms must specify how a loan and any interest are to be repaid on vacation of office by the education administrator.


Clause 26 (1) to (3) and (5)

The Welsh Ministers are given a power to agree to indemnify persons against liabilities incurred, and loss or damage sustained, in connection with the education administrator exercising their functions. Such indemnity may be on whatever terms the Welsh Ministers consider appropriate, and a statement of any such indemnity agreement must be laid before the National Assembly for Wales as soon as possible after the Welsh Ministers agree to grant it. The Welsh Ministers’ power to indemnify persons under this provision is limited to liabilities, loss and damage such persons incur or sustain, but includes a power to agree to indemnify persons who subsequently become “relevant persons”.  “Relevant person” includes the education administrator themselves and also those employed by or employing the education administrator.

Clause 27 (2), (3) and (5)

The Welsh Ministers are given a power to require an FE body to repay any sums that the Welsh Ministers may pay out under an indemnity (given under clause 26) and to determine the timing and manner of such repayments. The Welsh Ministers must lay a statement before the National Assembly for Wales in the event that a payment has to be made under an indemnity agreed under clause 26.

Clause 28

The Welsh Ministers are given the power to give guarantees in relation to the borrowings of an FE body in education administration. The Welsh Ministers must lay a statement of the guarantee before the National Assembly for Wales as soon as possible after the guarantee is given.

Clause 29

The Welsh Ministers are given a power, where sums are paid out by the Welsh Ministers under a guarantee (under clause 28), to direct an FE body to repay to them any amounts and interest on amounts outstanding. The Welsh Ministers also have power to determine the times and manner of payments to be made. The Welsh Ministers must lay a statement before the National Assembly for Wales, relating to the sum paid out under the guarantee, as soon as possible after the end of the financial year in which the sum is paid; and after the end of each subsequent financial year until the FE body has discharged its liability.  

Schedule 2, paragraphs 3, 4 and 5

The Welsh Ministers are given the power to approve any scheme of the education administrator for the transfer of property, rights and liabilities from an FE body to one or more persons or bodies prescribed in regulations made under section 27B of the Further and Higher Education Act 1992.  The Welsh Ministers are also given a power to modify a transfer scheme before approving it (but only if the education administrator and the transferee consent) and to modify a transfer scheme after it takes effect (by notice to the transferor and the transferee and with their consent).

Schedule 2, paragraph 8

The Welsh Ministers are given the function of providing conclusive evidence in the form of a certificate that anything specified in such a certificate has vested in a person under a transfer scheme.

Schedule 3, paragraphs 13 and 14 and Schedule 4, paragraph 12 and 13

The Welsh Ministers are given the function of receiving a copy of a statement of an administrator’s proposals in relation to an FE body (which sets out the administrator’s proposals for achieving the purpose of the administration) as provided in paragraph 49 of Schedule B1 to the Insolvency Act 1986.  They are also given the function of receiving a copy of any revised proposals where the education administrator thinks that the revisions are substantial.

Schedule 3, paragraph 21 and Schedule 4, paragraph 19

The Welsh Ministers are given the power to apply to the court claiming that the education administrator is not carrying out his/her functions in accordance with section 22(2) or (3) of the Act. The Welsh Ministers are also given the power to make representations on an application to the court made by a creditor and on the proposed remedy, relief or order. The court cannot grant such a remedy, relief or order until it has given the Welsh Ministers the opportunity to make such representations.

Schedule 3, paragraph 23 and Schedule 4, paragraph 21

The Welsh Ministers are given the power to apply to the court to request that the appointment of an education administrator of an FE body ceases to have effect from a specified time. The Welsh Ministers are also given the power to consent to the education administrator itself making such an application to the court.

Schedule 3, paragraph 24 and Schedule 4 paragraph 22

The Welsh Ministers are given the power to consent to the administrator of an FE body sending notice to the registrar of companies that paragraph 83 of Schedule B1 of the Insolvency Act 1986 applies (that is, that the administration should move to a voluntary liquidation).

Schedule 3, paragraph 25 and Schedule 4, paragraph 23

The Welsh Ministers are given the function of receiving a notice from the administrator that the FE body has no property which might permit a distribution to its creditors, and the power to direct the administrator to also notify the registrar of companies.

Schedule 3, paragraph 29 and Schedule 4, paragraph 27

The Welsh Ministers are given the power to apply to the court for the education administrator to be replaced.

Schedule 3, paragraph 34 and Schedule 4, paragraph 32

The Welsh Ministers are given the power, where a company entered administration by administration order, to apply to the court for a person to be appointed to act as administrator with the person or persons acting as the administrator of the company.

Reasons for making these provisions in the Technical and Further Education Bill

The Welsh Ministers were consulted on whether the insolvency regime should be extended to colleges in Wales. Welsh Ministers want the regime to extend to colleges in Wales in case it is needed in future to provide legal clarity and an orderly legal mechanism if a college becomes insolvent, and to protect learners.
Insolvency is an exception to the legislative competence of the National Assembly for Wales. The Wales Bill currently before Parliament sets out insolvency as a reservation from the future legislative competence of the National Assembly.  
It is considered appropriate for these provisions to be made in the Technical and Further Education Bill because they could not be made by an Act of the National Assembly.

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