Regulatory oversight of changes of ownership of private universities

Avid readers of this blog will recall that I have previously highlighted what appears to be some lack of clarity and robustness in the process for securing university title via Companies House, often known as the Companies House route. I raised some concerns in this post here. The criteria referred to in the final paragraph can be found here. Unfortunately, the link to the fascinating and rather indignant HEFCE Board minutes and papers on the then College of Law’s application for university title appears no longer to work.

Anyway, I revisited the criteria in view of the recently announced sale of the University of Law, to see what the regulatory implications of any such sale might be. Somewhat alarmingly, I found that the criteria had been withdrawn on 27 th March 2015 and that new guidance was under review but not yet available. Had I, I thought, stumbled upon a regulatory black hole?

I did not initially see the link to read more about the review. When I clicked on it I found that far from being withdrawn, the guidance continued to apply until such time as the new guidance is in place, certainly in so far as change of ownership is concerned. So the position remains that:

“When the ownership or control of a university or university college changes, it must inform BIS of the intended sale or change and, within three months of conclusion of the sale or change, provide evidence that it continues to satisfy the criteria for student numbers and good governance as set out in this guidance”

The information provided about the review of the criteria goes on to point out that “if, following a change in ownership, control or legal status, an organization needs to reapply for degree awarding powers” then those will be dealt with under the current (also withdrawn) criteria for degree awarding powers.

This last point baffled me a little bit, as I wasn’t aware that change of ownership or control of itself triggered a need to reapply for DAPs. (As for legal status, readers will recall that the College of Law’s conversion from a charity established by Royal Charter to a for-profit company did not trigger a reapplication for DAPs, which begs the question what degree of change of legal status BIS has in mind here?) My understanding was that for private providers, DAPs are renewed every six years, irrespective of whether the ownership or control changes or stays the same.

In any event, it occurred to me that these are very reactive arrangements that leave an awful lot of uncertainty for buyer, seller and students in circumstances of change of control. What if under the new owner the university no longer complies with the criteria for student numbers, or (more possibly) the criteria for good governance? What if there is some need to reapply for DAPs and they are not then secured?

Even more worryingly what if no changes are made in the short term, but immediately after BIS has signed off on a change of ownership, changes are made that call into question the ongoing governance of the university? How will these be picked up before the next scheduled review of DAPs, which could be six years hence. What would a refusal to renew DAPs mean for students and graduates, for that matter?

Could the right to use university in the title at some stage be lost? The regulations surrounding company names indicate that once the right to use a sensitive word such as “university” is granted it may be withdrawn if:

  • Misleading information was used to support the use of the sensitive word was supplied. This ground applies for five years after the original grant of permission; or
  • The name gives so misleading an indication of the company’s activities it is likely to cause harm to the public.

It will be interesting to see if these provisions are ever invoked – the wording is certainly not conducive to simple or speedy regulatory action.

All this ambiguity led me to question whether it would not be better to have a prospective system of clearance for changes of ownership, where plans are reviewed and approved in advance rather than the risk that, after the event, regulatory interventions are required. Maybe devising this is something that needs to be added to the HE Regulation “to-do list” along with a single gateway and managing provider failure.

Smita Jamdar
Partner and Head of Education
For and on behalf of SGH Martineau LLP
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From → General Interest

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  1. Gravatar

    Here's those HEFCE Board LOLs: www.hefce.ac.uk/.../B77redacted.PDF

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