McTear Williams & Wood Limited were contacted by the Board of Trustees of an independent private school for three to 18-year-olds with boarding from age nine. The charity had been formed in 1928 but was incorporated in 1973.
Industry overview
Challenges/situation
Student numbers had been gradually reducing for a number of years, which required additional financing to fund the trading losses. The trustees explored options with a finance broker and discussed the possibility of merging with another local private school and a sale of the business and assets to a third party.
Risks
Whilst every avenue was being explored to save the school from closure “plan A” time was against the Trustees with a new school academic year fast approaching and we helped the trustees develop a closure “plan B” which could be implemented to provide sufficient time to assist parents with finding alternative schools for their children. Many parents had already paid the school fees for the year in advance and there were students due to travel to the UK from abroad to board for the new school year.
The solution
McTear Williams & Wood attended multiple board meetings and gathered detailed financial information to determine the funding requirement. We introduced the trustees to a finance broker who specialises in difficult lending situations. We also gave the trustees regular written advice that they were not breaching any directors’ duties. During this time several funding proposals were put forward and subsequently rejected or withdrawn.
Having explored all opportunities it became clear that additional funding could not be secured and in August after further students withdrew from the school the trustees concluded the charity would need to enter creditors’ voluntary liquidation.
With the academic year due to start in less than a month, the liquidation needed to happen quickly. McTear Williams & Wood assisted with notifying over 100 employees of their redundancy, and the School’s senior management team contacted local schools to help parents find a place for their children in the upcoming year.
Summary
Andrew McTear was appointed liquidator of the Company limited by guarantee on 2 September, two days before the new school year was due to start.
Whilst the liquidation resulted in the school permanently closing it allowed an orderly wind down of all affairs and the sale of the substantial freehold property, resulting in all creditors being repaid in full with statutory interest. This also resulted in all parents being repaid the tuition fees they had paid in advance for the school year.
With approval from the Charity Commission the surplus funds in the liquidation were transferred to a new charity which had similar objectives.
